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FINAL ASSESSMENT REPORT
PES/REDD+ FINANCE ASSESSMENT AND
DEVELOPMENT OF STRATEGIES TO
INCENTIVIZE LANDSCAPE SCALE LEDS
JAKARTA, MARCH 31, 2016
This publication was produced for review by the United States Agency for International Development. It was prepared
by Tetra Tech ARD.
This publication was prepared by PT. Hydro Program International and supported by the
USAID LESTARI program.
This publication was prepared for review by the United States Agency for International
Development under Contract # AID-497-TO-15-00005.
The period of this contract is from July 2015 to July 2020.
Annex 3. KUR Application Procedure and Distribution Mechanism ........................ 124
Annex 4. Questionnaires for LESTARI Site Visit ....................................................... 126
Annex 5. List of Stakeholders Consulted .................................................................. 134
Annex 6. Government Regulations Related To PES And REDD+ ............................ 136
Annex 7. Indicative Work Plans .................................................................................. 149
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LIST OF TABLES Table 1: Financial barriers, types and mechanisms ............................................................. 22 Table 2: Sources of existing FMU development funding ...................................................... 28 Table 3: Shared Revenue (DBH) distribution ....................................................................... 31 Table 4: Plan for the 2016 sectoral KUR feature.................................................................. 35 Table 5: FIP activities in Indonesia ...................................................................................... 47 Table 6: FIP funds allocation ............................................................................................... 47 Table 7: FIP I activities and collaborating institutions ........................................................... 48 Table 8: FIP II activities and collaborating institutions .......................................................... 49 Table 9: FIP III activities and collaborating institutions ......................................................... 50 Table 10: List of projects in Indonesia under UK’s International Climate Fund ..................... 64 Table 11: Overview of Compliance and VER Markets for land-based mitigation .................. 69 Table 12: Land-based Emission Reduction Markets per world region .................................. 71 Table 13: Eligibility of KEHATI grants .................................................................................. 73 Table 14: Type and reporting line of FMUs/KPHs ................................................................ 80 Table 15: List of KPHs in LESTARI landscapes .................................................................. 81 Table 16: Division of authority - natural protected area ........................................................ 93 Table 17: Funds profile ...................................................................................................... 116 Table 18: REDD+ related regulations at the national level ................................................. 136 Table 19: REDD+ related regulations at the sub-national level .......................................... 141 Table 20: PES related regulations at the national level ...................................................... 143 Table 21: List of PES and REDD+ related regulations in Aceh .......................................... 147 Table 22: List of PES and REDD+ related regulations in Central Kalimantan .................... 147 Table 23: List of PES and REDD+ related regulations in Papua ........................................ 148
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LIST OF FIGURES Figure 1: Ecosystem services from forests .......................................................................... 18 Figure 2: International climate finance ................................................................................. 21 Figure 3: Global climate finance architecture diagram ......................................................... 22 Figure 4: Government management of foreign funding ........................................................ 23 Figure 5: The landscape of public finance in Indonesia ....................................................... 25 Figure 6: ICCTF fund management ..................................................................................... 27 Figure 7: Distribution mechanism for local grants ................................................................ 39 Figure 8: Total bilateral and multilateral ODA committed to the forestry sector 2013 ........... 42 Figure 9: Total bilateral ODA to reduce GHG emissions in the forestry sector ..................... 42 Figure 10: Total commitments to REDD+ by donor type, 2009-2014 ................................... 43 Figure 11: REDD+ finance commitments by donor type, 2009-2014 ................................... 43 Figure 12: Phases of Norwegian fund based on LoI ............................................................ 44 Figure 13: Milestones of REDD+ readiness ......................................................................... 52 Figure 14: Carbon Fund processing steps: From ER-PIN to ERPA Implementation ............ 53 Figure 15: Milestones of Indonesia’s activity under FCPF ................................................... 55 Figure 16: Flow chart for GCF initial proposal approval process .......................................... 57 Figure 17: Voluntary land-based emission reduction volume traded and transaction
value ................................................................................................................................... 69 Figure 18: Certification Standards in voluntary land-based emission reduction market ........ 70 Figure 19: Transacted emission reduction volumes (tCO2e) per project status .................... 70 Figure 20: Origin & destiation of land-based ERs in voluntary and compliance markets ...... 72 Figure 21: Institutions with a mandate to implement REDD+ at the LESTARI landscape .... 85 Figure 22: Institutions with a mandate to implement PES in Indonesia ................................ 86 Figure 23: PES concept based on draft government regulation ........................................... 92 Figure 24: PES mechanism based on draft government regulation ..................................... 92
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ACRONYMS AND ABBREVIATIONS ADB Asian Development Bank
AE Accredited Entity (for GCF)
AFOLU Agriculture, Forestry and Other Land Use
AMEP Activity Monitoring and Evaluation Plan
APBD Anggaran Pendapatan dan Belanja Daerah (Sub-national Government
Budget)
APBN Anggaran Pendapatan dan Belanja Negara (State Budget)
APL Area Penggunaan Lain (Other Land Use)
B Billion
BAPPEDA Badan Perencanaan Pembangunan Daerah (Local Development
Planning Agency)
BAPPENAS Badan Perencanaan Pembangunan Nasional (National Development
Planning Agency)
BI Bank Indonesia (Central Bank of Indonesia)
BioCF BioCarbon Fund
BIOCLIME Biodiversity and Climate Change Program
BKF Badan Kebijakan Fiskal (Fiscal Policy Agency)
BKSDA Balai Konservasi Sumber Daya Alam (National Resources Conservation
Agency)
BLH Badan Lingkungan Hidup (Government Environmental Agency at sub-
national level)
BLU Badan Layanan Umum (Public Service Agency)
BLUD Badan Layanan Umum Daerah (Local Government Public Service
Agency)
BNI Bank Nasional Indonesia (National Bank of Indonesia)
BPDAS Badan Pengelola Daerah Aliran Sungai (Watershed Management
Agency)
BP-REDD+ Badan Pengelola REDD+ (Indonesia REDD+ Agency)
BP2HP Balai Pemantauan Pemanfaatan Hutan Produksi (Monitoring Agency for
the Utilization of Production Forest)
BRG Badan Restorasi Gambut (Peatland Restoration Agency)
BRI Bank Rakyat Indonesia (People Bank of Indonesia)
BUMD Badan Usaha Milik Daerah (Local Government Owned Company)
CA Conservation Area
CBFM Community Based Forest Management
CCBS Climate, Community, and Biodiversity Standard
CCBA PDD Climate, Community and Biodiversity Alliance - Project Design Document
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The SGP selection mechanism consists of two stages: (i) the screening of all proposals
based on administrative requirements; and (ii) an in-depth assessment based on specific
criteria (Step 2 and Step 3 of Annex 2). The application process and selection criteria of
larger grant projects is envisioned to be slightly different to those of the SGP, and are
currently still under development.
Financial due diligence includes performance based payments that will be conducted over
the duration of any approved projects in lieu of agreed upon milestones between the ICCTF
and the recipient/beneficiary to monitor the progress of the project in achieving an individual
project's objectives. In addition, lessons learnt from projects previously implemented will also
be identified and documented in the ICCTF's investment and fundraising strategies.
The ICCTF has also registered to be a National Implementing Entity (NIE) to the UNFCCC’s
Adaptation Fund. Its transition to becoming Indonesia’s NIE to the Adaptation Fund is being
supported by GIZ, the German development agency. However, challenges remain. Although
the establishment of the ICCTF is a step in the right direction, there is no overarching
mechanism for donor coordination (EIA Commission 2015). Moreover, the policies and legal
framework at the provincial and local levels are not yet adequate for facilitating the delivery
and management of climate finance.
2.1.2. Forest Management Unit (FMU) Fund
Eligibility All types of FMUs/KPHs: FMU Conservation (KPHK), FMU Protection (KPHL), FMU Production (KPHP)
Funding Mechanism Budget transfer
Size of Funding Available
Up to IDR 3 billion (~ USD 225,000) per KPH; however, the actual funds disbursed are much less. Government allocated budget for the KPHs changes from year to year with a decreasing trend
Funding Disbursement
Yearly as part of government budgeting process
Additional Info KPHK is funded by central government, KPHP and KPHL are funded by both APBN and sub-national government budgets (APBD)
FMUs (locally known as Kesatuan Pengelola Hutan - KPH) have the potential to play a
significant role in contributing to sustainable development by protecting natural resources,
reducing GHG emissions from forest and peatlands, and by improving the livelihoods of local
communities. There are three types of FMUs: Conservation FMUs (KPHK), Protection FMUs
(KPHL), and Production FMUs (KPHP). The KPHK is managed directly by the national
government, while the KPHL and KPHP are currently managed by the district government
and will soon be transferred to the provincial government.3
3 As part of the implementation of Law No. 23 of 2014 on Local Governance. The transfer of authority is expected to be
completed by October 2016.
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The source of funding for KPH development and operation comes from the state budget
(APBN), sub-national government budget (Anggaran Pendapatan Belanja Daerah, APBD),
and other legal and legitimate funds. Significant financial input from local, national and
international sources, as well as the KPH’s own income stream, are still needed to set up the
management structure and the technical infrastructure of KPHs. Existing KPH development
funds are summarized in the following table.
Table 2: Sources of existing FMU development funding
State Budgets (APBN) Local Government
Budget (APBD) Other legal and legitimate funds
Special Allocation Fund (Dana Alokasi Khusus - DAK) on forestry
Intergovernmental fiscal transfers
Grants
Shared revenue (Dana Bagi Hasil - DBH)
Local revenue (Pendapatan Asli Daerah - PAD).
Corporate Social Responsibility (CSR) fund
De-concentration fund – PES
National community empowerment program (PNPM) – Mandiri Kehutanan
– –
Village fund – –
Co-administration task fund (DTP) – –
Source: (PKPPIM 2015)
The following section describes each type of source – state budget, local budget and others
– the Shared Revenue Fund (Dana Bagi Hasil – DBH), the Village Fund (Dana Desa), and
the PNPM – Mandiri Kehutanan will be discussed further in Section 2.1.3, Section 2.1.4 and
Section 2.1.5 respectively.
Special Allocation Fund (Dana Alokasi Khusus – DAK)
The Special Allocation Fund (locally known as Dana Alokasi Khusus - DAK), is sourced from
the state budget (APBN) and allocated to a particular region to fund special activities in
accordance with national priorities based on criteria set by the government. In the forestry
sector, DAK is one of the sources of funding used to finance forestry development at the
subnational level. DAK-forestry policy in 2014 was focused on the improvement of KPHP
and KPHL, the improvement of watershed capabilities, protection of forests and essential
areas, and community empowerment.
Deconcentration Fund (Dana Dekonsentrasi)
The Deconcentration Fund is a form of funding from the state budget (APBN) and is
deployed by the governor at the provincial level, covering all expenditures for delegation of
tasks from the central government to provincial government, excluding funds allocated for
central governmental offices located in the regions.
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Co-Administration Task Fund (Dana Tambahan Penghasilan – DTP)
The Co-Administration Task Fund (DTP) is a fund from the state budget that is transferred to
local government and includes all revenues and expenditures for implementing tasks. It is
mainly allocated for the development of infrastructure. Funds for co-administration are also
one source of funding that can be implemented by local government financed by the KPHs,
given that the development and operationalization of KPHs is one of KPH’s priority policies.
Sub-national Government Budget (APBD)
The Sub-National Government Budget (APBD) comes from intergovernmental fiscal
transfers. Funds transferred from the central government that can be used for forestry
development include DAK-Forestry, DBH-DR, DBH-PSDH, and DBH-IIUPH. Local
governments can use these mechanisms to fund forestry development activities in territories
under their administration by referring to central government rules.
A study from the Center of Climate Change Financing and Multilateral Policy (Pusat
Kebijakan Pembiayaan Perubahan Iklim dan Multilateral – PKPPIM) under the Fiscal Policy
Agency (Badan Kebijakan Fiskal – BKF) at the MoF suggested that alternative funding from
CSR, grants, and the PNPM have higher efficiency and effectiveness than other existing
options, although budget from these three sources is smaller than that of the DAK and DBH
mechanisms (PKPPIM 2015). However, the utilization of alternative sources of funding
needs to be accompanied by institutional changes in the KPH. The KPHK and KPHL are
structured as the Public Service Agency (Badan Layanan Umum, BLU) and the Local Public
Service Agency (Badan Layanan Umum Daerah, BLUD), while the KPHP is advised to
change into a BLUD or Local Government-owned Enterprise (BUMD).
2.1.3. Shared Revenue Fund (Dana Bagi Hasil – DBH) on Forestry
Eligibility All district/city governments
Funding Mechanism Budget transfer
Size of Funding Available
Variable, depending on the revenue of the year; proportion is calculated based on proportion in Shared Revenue (locally known as Dana Bagi Hasil – DBH) is a fund sourced from the state budget (APBN) and allocated proportionally to a region to finance the implementation of decentralizing processes. The distribution of DBH in forestry is implemented based on natural resource revenues in the current budget and distributed on a quarterly basis through transfer from the State Treasury to the Regional Treasury Account.
The distribution mechanism of the DBH starts with the selection of the producing regions and determines the basis for calculating the DBH of natural resources by the MoEF after consulting with the Ministry of Home Affairs. The criteria are then conveyed to the MoF to be decreed as estimated DBH of natural resource allocation for each region. The calculation of real DBH of natural resources is carried out on a quarterly basis through data reconciliation between the
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central government and the producing regions. The distribution of state revenue derived from forestry DBH is divided in the following way:
Table 3
Funding Disbursement
Distributed on a quarterly basis through transfer from the State Treasury to the Regional Treasury Account
Shared Revenue (locally known as Dana Bagi Hasil – DBH) is a fund sourced from the state
budget (APBN) and allocated proportionally to a region to finance the implementation of
decentralizing processes. The distribution of DBH in forestry is implemented based on
natural resource revenues in the current budget and distributed on a quarterly basis through
transfer from the State Treasury to the Regional Treasury Account.
The distribution mechanism of the DBH starts with the selection of the producing regions and
determines the basis for calculating the DBH of natural resources by the MoEF after
consulting with the Ministry of Home Affairs. The criteria are then conveyed to the MoF to be
decreed as estimated DBH of natural resource allocation for each region. The calculation of
real DBH of natural resources is carried out on a quarterly basis through data reconciliation
between the central government and the producing regions. The distribution of state revenue
derived from forestry DBH is divided in the following way:
Table 3: Shared Revenue (DBH) distribution
Institution
Forest Exploitation Permit Fee
(IIUPH)
Forest Resource Provision (PSDH)
Reforestation Fund (DR)4
Central government 20% 20% 60%
Provincial government 16% 16%
District/city government 64% - 40%
District/city government where the production takes place
- 32% -
Other districts/cities in the province
- 32% -
Source: (PKPPIM 2015)
4 To be used for forest and land rehabilitation.
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2.1.4. Village Fund (Dana Desa)
Eligibility All villages
Funding Mechanism Budget transfer
Size of Funding Available
IDR 1 billion (~ USD 74,000) per village with possibility to increase
Funding Disbursement
Yearly as part of government budgeting process. The fund is transferred from the central government account to village’s account via district government’s account
Additional Info Efforts are being made at the district and village levels to better manage and allocate the money based on village needs and priorities
The Village Fund is mandated by Law No. 6 of 2014 (Village Law), which allows all villages
across the archipelago to receive IDR 1 billion per year of assistance from the central
government to develop their economies and infrastructure. The Village Fund covers funds
from the state budget earmarked for villages, which are transferred through the district/city
budget and are used to finance administration and development, and to foster social and
community empowerment.5
The Fund is aimed at improving the welfare of rural communities and the quality of human
life, as well as poverty reduction, through: (1) the fulfillment of basic needs; (2) the
development of rural infrastructure; (3) the potential development of local economies; and (4)
the use of natural resources in an environmentally sustainable manner.6 The use of village
funds for sustainable development needs based on the condition and potential of the village,
which among others, includes support for management of village forests (Hutan Desa – HD)
and community forests, and capacity development for local communities on renewable
energy and the environment (PKPPIM 2015).
The Village Fund, as part of the village decentralization process, is a relatively new
government initiative that has great potential to accelerate local development. As it has only
just begun, it is too early to examine and debate program implementation outcomes,
however, a number of challenges in the design of the nascent program have already
become apparent. When large resources are directed into a village without strong oversight,
budgets are not always used for the benefit of those that need them the most (World Bank
2015). In addition, the Village Law itself does not provide an adequate enough basis for
regulating proper village financial management. Some believe that the initiative is all about
the distribution of money with no clear plan for its proper management (East Asia Forum
2015).
Despite stipulations in the Ministry of Villages, Underdeveloped Regions and Transmigration
Regulation No. 21 of 2015 on the Priority of Village Fund Utilization in 2016, a big portion of
5 Government Regulation No. 60 of 2014 on Village Fund Originating from the Budget of the State Budget, amended by
Government Regulation No. 22 of 2015. 6 Village, Rural Development and Transmigration Ministerial Regulation No. 5 of 2015.
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the money is currently spent on infrastructure development, with less being spent on
community empowerment. At the sub-national level, the provincial and district governments
are still in the process of formulating local regulations and developing guidelines on the
management of the Village Fund, while the funds have actually already been handed over to
the villages. This is due to lack of capacity within local government, village administration,
and local communities (East Asia Forum 2015). Furthermore, mechanisms to control village
spending are underdeveloped.
In LESTARI landscapes, initiatives using the Village Fund for activities related to the
environment and forestry that support local economic development can be seen in Aceh
Tenggara and Central Kalimantan. In Aceh Tenggara, the district/regency government hires
six experts as external consultants to provide technical assistance, which takes the form of
advocacy efforts aimed at promoting the issuance of three to four provincial regulations as a
regulatory framework and at developing guidelines and a management plan for the utilization
of the Village Fund. In Central Kalimantan, there have been discussions among various
government institutions, local communities, and NGOs on using the Village Fund to finance
initiatives related to forest fire management at the village level. These initiatives, however,
are still in a preliminary stage.
2.1.5. National Community Empowerment Program (Program Nasional
Pemberdayaan Masyarakat PNPM – Mandiri Kehutanan)
Eligibility Villages in and around forest areas
Funding Mechanism Budget transfer (from central and district government to village government)
Size of Funding Available
Variable
Funding Disbursement
Yearly as part of government accounting process
The PNPM – Mandiri Kehutanan program aims to alleviate poverty in areas surrounding
forests, in collaboration with a range of sectors other than forestry and is coordinated by the
Coordinating Ministry for Humanity and Cultural Development (Kementerian Koordinator
Bidang Pembangunan Manusia dan Kebudayaan, formerly Kemenko Kesra).7 The PNPM
program consists of various activities including the development of conservation villages,
community forestry, partnerships, and village forest management for communities
surrounding protected forests and production forests. The program’s beneficiaries are
groups of people who have been identified by the Technical Implementation Unit (Unit
Pelaksana Teknis, UPT) or Regional Technical Implementation Unit (Unit Pelaksana Teknis
Daerah, UPTD), Regional Offices of Forestry, and license holders in the field of forestry and
local communities.
7 Forestry Ministerial Regulation No. 16 of 2011 on General Guidelines of the National Program for Community
Empowerment in Forestry.
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2.1.6. People’s Business Credit Program (Kredit Usaha Rakyat - KUR)
Eligibility Micro, small and medium enterprises (MSME) and cooperatives
Funding Mechanism
Credit and micro-credits backed by guarantees from state-owned companies
Size of Funding Available
Micro KUR: IDR 25 million (~ USD 2,000) for a max. of 3 years for working capital and 5 years for investments
Retail KUR: IDR 25 million to IDR 500 million (~ USD 2,000 to USD 38,000) for a max. of 4 years for working capital and 5 years for investments, can be extended to up to 10 years for hardwood investment
TKI KUR (designed for migrant workers): IDR 25 million (~ USD 2,000), duration is based on the migrant workers’ employment contract and shall not exceed 3 years
Sectoral KUR: IDR 500 million – IDR 30 billion (~ USD 38,000 – USD 2 million) for max. 10 years
Funding Disbursement
Three different mechanisms:
directly to MSME from participating banks
indirectly through linkage institutions by executing patterns
indirectly through linkage institutions by channeling patterns
Additional Info Types of credit at the moment: micro KUR, retail KUR, TKI KUR (designed for migrant workers)
Sectoral KUR is planned to be introduced in 2016
The people’s business credit program (KUR), established in 2008, is a credit/working capital
and/or investment financing scheme specifically dedicated to micro, small and medium
enterprises (MSME) and cooperatives in the productive enterprise8 sector that are mostly not
bankable9 due to lack of collateral (Tim Nasional Percepatan Penanggulangan Kemiskinan,
TNP2K, n.d). The KUR aims to accelerate the development of economic activities, alleviate
poverty and expand work opportunities. Individual or community groups in the LESTARI
landscapes may use this credit to finance activities related to the LESTARI
programs/projects later on. Through this credit, commercial banks provide working capital to
microfinance institutions (MFIs). The loans are guaranteed by the government through
guarantor institutions.
The implementation of the KUR program is supported by three pillars: government,
guarantor institutions and banks. The government, through the Bank of Indonesia (BI) and
line ministries (e.g. Ministry of Agriculture, Ministry of Environment and Forestry, Ministry of
Maritime Affairs and Fisheries), assists and supports the implementation of credit provisions
and guarantees. Two state-owned companies, PT. Asuransi Kredit Indonesia (PT. Askrindo)
and Perusahaan Umum Jaminan Kredit Indonesia (Perum Jamkrindo), currently serve as
8 Effort to produce goods or services to provide added value and increase entrepreneur income. 9 MSME that are not able to meet a bank’s credit/financing requirements.
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guarantor institutions that guarantee the credit distributed by the banks. Banks are recipients
of the guarantees and serve as credit distributors to the MSMEs. To date, three commercial
banks, Bank Rakyat Indonesia (BRI), Bank Mandiri, and Bank Negara Indonesia (BNI), carry
out the function of credit lenders.
The Indonesian Government intends to mobilize between IDR 100 trillion to IDR 123 trillion
(~ USD 7.2 billion to USD 8.89 billion) in 2016 as small business loans under its KUR
program for the purpose of boosting economic growth (Coordinating Minister for Economic
Affairs 2015). Additionally, the government has been preparing to cut the lending rate of its
subsidized KUR from 22%-24% to as low as 9% and to merge the credit program scheme
into the sectoral KUR in 2016 (Coordinating Minister for Economic Affairs 2015). To reach
these targets, the government is considering adding PT. Jaminan Kredit Daerah (PT.
Jamkrida) as a guarantor institution in each province. The government is also considering
including more state, private and regional development lenders for the credit program.
Furthermore, non-banking financial institutions (NBFIs), finance companies, and venture
capital companies will serve as distributing institutions and and/or linkage institutions.
The sectoral KUR is aimed at supporting development of business in each area based on
their respective potential. It has a higher credit ceiling (IDR 500 million to IDR 30 billion or ~
USD 38,000 to USD 2,250,000) and has targeted a number of sectors such as food-crops,
horticulture, plantation/estates, livestock, cow nursery, marine tourism, renewable energy
and energy conservation. Table 4 summarizes the government’s plan for the sectoral KUR
feature in 2016 - the details of the application procedure and distribution mechanism are
available in Annex 3.
Table 4: Plan for the 2016 sectoral KUR feature
No Description 2016’s sectoral KUR
1 Interest As much as 9% effective yearly or adjusted by equivalent flat interest
2 Activities funded
Food-crops, horticulture, plantation/estates, livestock, cow nursery, marine tourism, rice, cacao, coffee, sea weed, rattan and salt, renewable energy and energy conservation that will contribute to the realization of the National Energy Policy as stipulated in Government Regulation No. 79 Year 2014, conservation of industrial energy as regulated in Government Regulation No. 70 Year 2009 or Ministry of Energy and Mineral Resources (MEMR) No. 14 Year 2010
3 Credit ceiling Between IDR 500 million – IDR 30 billion (~ USD 38,000 – USD 2.25 million)
4 Duration Maximum 10 years
5
Extension period, restructuring, and extension
In case extension is needed, credit ceiling, or restructuring of working capital and/or investment, then the extension period, credit ceiling, and/or restructuring will follow the characteristics of each commodity
6 Guarantee binding
Additional collateral based on assessment by bank
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No Description 2016’s sectoral KUR
7 Grace period Based on characteristic of each commodity
Source: (Coordinating Minister for Economic Affairs 2015)
2.1.7. Timber Harvesting Postponement Credit (Kredit Tunda Tebang - KTT)
Eligibility Farmer groups, cooperatives (those receiving loans from government)
Individuals/members can apply for the loan to the cooperative or farmer group receiving money from the government/MoEF
Funding Mechanism
Low-interest credit
Size of Funding Available
Variable, depending on the size of community group/cooperative
Variable, maturity is 5-8 years (depending on the harvest)
Funding Disbursement
Lump sum, directly to community group/cooperative
Lump sum, directly to individual applying for loan
To encourage community forest farmers to postpone timber harvesting, the MoEF provides
Harvest Postponement Credits (locally known as Kredit Tunda Tebang - KTT), which allow
farmers not to cut when in need but to wait until the trees are bigger and thus carry a greater
commercial value. With this credit, farmers can pursue productive activities. Collateral takes
the form of standing crops or community forest trees with a circumference of 30 centimeters.
Farmers are not allowed to cut down the trees that are pledges within a predetermined
timeframe.
This credit is managed by the Public Service Agency (Badan Layanan Umum - BLU) Unit –
Center for Forest Development (Pusat Pembiayaan Pembangunan Hutan - Pusat P2H),
which helps the farmers apply for credit with a loan term of between up to five and eight
years, and with low interest referring to the Central Bank of Indonesia’s interest rate.
The credits can be used for a number of purposes, for example, for the livestock sector
(50%), economically productive activities such as furniture production or additional capital,
restaurants, and wood trading (40%). They can also be used for paying school fees and
consumer costs.
An example of the successful operationalization of this credit comes from the forest farmers
group (locally known as Kelompok Tani Hutan - KTH) in Jasema, Terong Village, Bantul
Regency of Jogjakarta province. Other areas where KTT has been operationalized are
Bojonegoro in East Java and Banyumas in Central Java (Bidik Online 2015).10
10 Requirement and application form can be downloaded at http://www.dephut.go.id/uploads/files/perkaP2H_p01-
The Community-Based Natural Resources Management (CBNRM) grant is one of the three
windows under the Green Prosperity (GP) Facility that will make available grant funding for
smaller scale projects that promote enhanced natural resource management to improve the
sustainability of GP Facility’s renewable energy and/or agricultural investments, as well as
support rural livelihoods and economic development. The CBNRM grant can be used to
finance the following types of project: integrated landscape, watershed and catchment
protection, community-based or collaborative natural resource management projects,
sustainable agriculture for smallholder farmers, and small-scale, community-based
renewable energy or heat generation.
CBNRM works in 10 provinces and 24 districts in Indonesia, but does not operate in either
Aceh or Central Kalimantan. In theory, the Watershed Fund structure of SCBFWMs &
CBNRM could be closely aligned with LESTARI’s Conservation Management and
Monitoring Plans (CMMPs).
2.1.9. Grant from the Central Government to Local Government (Hibah Daerah)
Eligibility Local government
Funding Mechanism Grants
Size of Funding Available
Variable
Funding Disbursement Yearly as part of government budgeting process
Note Fund allocation should be based on criteria; however, no clear and robust criteria have been developed so far. Current disbursement of funds only targets mitigation actions, not yet targeting prevention and adaptation actions.
Grants from the central government to local governments are intended to support local
development programs based on the priorities and policies of the government. These grants
can originate from grants received from domestic revenue (APBN or other sources) or
forwarded grants/loans from international donors (loans or grants). They could be in the form
of cash, or goods and services. Local governments may need to provide matching grants if
required, depending on the agreement or contract with the donors.
Grants from the Central Government to the Local Government are stipulated under
Government Regulation No. 2 of 2012. This regulation provides guideline criteria on how
grants should be operationalized and what types of activities can be supported, depending
on the origin of the money, i.e. whether it comes from foreign or local sources. However, the
criteria that local governments would need to meet to receive the grants are not yet defined.
The following figure details the mechanism for channeling grants to the sub-national
governments:
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Figure 7: Distribution mechanism for local grants
Source: (Ministry of Finance 2013) Presentation of Director of Financing and Local Capacity
Grants received by sub-national governments are managed and implemented in the sub-
national government budget (APBD) mechanism according to respective laws. This means
that the grants and the matching grants (if required by the Agreement) must be budgeted
and included in the Budget Implementation Document of the Local Government Unit (SKPD).
For monitoring and evaluation as well as the audit, the regions that received grants must
submit a report on the progress of activity implementation on a quarterly basis to the
BAPPENAS and to related state ministers/head of technical agencies. Sanctions can be
imposed on local governments to prevent grants from being incorrectly used by ensuring that
they are no longer channeled to the regions in question.
The Government Disaster Mitigation budget is one example of a grant given by the central
government to the local government. Its terms are stipulated in Government Regulation (PP)
No. 22 Year 2008 on Financing and Management of Disaster Relief. At the time of writing,
the disaster mitigation budget can only be used to finance activities at the emergency and
post disaster stages, and is not yet able to finance pre-disaster activities.
The government considers forest fires as a national disaster and aims to shift more
resources towards prevention. The latest development shows that the National Disaster
Relief Agency (Badan Nasional Penanggulangan Bencana - BNPB) and the Sub-National
Disaster Relief Agency (Badan Penanggulangan Bencana Daerah - BPBD) are keen to work
with local communities at the village level on forest fires prevention activities. The BNPB and
BPBDs allocate special budget (for operations, logistics and equipment), and in cooperation
with the sub-national government and private sector, provide incentives in the form of
financial or non-financial rewards to fire-prone villages that are able to keep their forested
areas free of fires.
This initiative has been implemented in Riau and Jambi provinces in the island of Sumatera,
where the government provides a financial reward of IDR 100 million (~ USD 7500) to
villages that are free from forest fires (desa bebas api/desa peduli api). The Government of
Central Kalimantan has discussed its intention to set up a grand strategy and a road map for
community-based forest fire prevention management and has organized coordination
meetings at the provincial level for this purpose. They have also discussed the possibility of
replicating the desa peduli api program in Central Kalimantan. Furthermore, the BNPB also
intends to make use of the village fund for community-based forest fire prevention program
and it is currently coordinating with the Ministry of Villages, Underdeveloped Regions, and
Transmigration on this plan.
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The Government Disaster Mitigation Budget is a potential fund for financing REDD+ and
PES activities. However, the eligibility criteria for local governments to receive this grant
need to be developed. Another challenge in utilizing this fund for the financing of pre-disaster
activities relates to government accounting issues, whereby the disaster mitigation budget is
currently placed under the accounts of the government contingency fund. This means that
this fund is not allocated to each ministry/agency but rather comes under the control of the
MoF, and can then be accessed by any ministry/agency in an emergency situation.
Contingency funding can only be used when it is deemed completely necessary, and
disaster prevention activities are currently still considered as not urgent in comparison to
activities at the emergency and post-disaster stages. To date, the bulk of contingency
funding is used by the police department to deal with terrorism issues.
2.1.10. National Park Fund (Dana Taman Nasional)
Eligibility National Park Agency
Funding Mechanism Government allocated budget (central government)
Size of Funding Available Variable, depending on the area and priority
Funding Disbursement Yearly as part of government budgeting process
Note National park is managed and funded by central government
The main source of funding for national parks in Indonesia comes from the APBN. The
budget used for financing operational activities in national parks comes from the budget
allocated to each national park through the Budget Implementation List (DIPA), which
includes transactions for personnel expenditures, shopping goods, and capital expenditure.
National parks also receive support from international, multilateral, bilateral, private sector
and community funding, and through partnership with donors. The MoEF allocates
approximately IDR 10 – 20 billion for daily operational activities for each national park. The
funds vary depending on the size of the national parks and the types of activities carried out.
National Parks in Aceh
Current support from donors for national parks in LESTARI landscapes in Aceh include:
Climate change mitigation and species conservation in the Leuser ecosystem
This project aims to support the sustainable management of the Gunung Leuser ecosystem
in Sumatra, in particular in the Aceh Selatan, Subulussalam and Singkil districts. This project
is expected to balance the needs for biodiversity conservation with those of the population
for using the natural resources. KfW Development Bank is the implementing organization
and has provided financial support totaling EUR 8,499,414 (~ USD 9,487,895.85). The
project runs from August 2013 – April 2019.
Protection of Aceh Selatan Singkil Strategic Area
TFCA-Sumatera is a Debt for Nature Swap (DNS) Program between the US Government
and the Government of Indonesia with two swap partners, namely Conservation International
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and KEHATI-The Indonesia Biodiversity Foundation. The program provides grants to local
NGOs and universities in Indonesia focusing on conservation in Sumatera and rehabilitation
of landscapes with a total funding commitment of USD 30 million over an eight-year period
(2009-2018).
National Parks in Central Kalimantan
Current support from donors for national parks in LESTARI landscapes in Central
Kalimantan include:
Sebangau Conservation Project
This project was initiated by WWF in Sebangau National Park. The following three activities
were conducted: restoration and rehabilitation (canal blocking and tree planting program),
community empowerment (ecotourism, agroforestry, fisheries, sustainable agriculture and
home industry), and collaborative management between Sebangau National Park and local
stakeholders (local government, NGOs, communities, researchers and the private sector).
Developing a Productivity Model of Local Responsibility in Ecosystem Restoration in
Kotawaringin East, Central Kalimantan
GEF provides small grants of USD 30,000 with co-financing of USD 44,260 for community
development of ecosystem restoration plans and REDD+ projects to optimize benefits for
communities and other local stakeholders in Kotawaringin Timur, Central Kalimantan. The
project aimed to increase communities’ bargaining position in relation to the management of
natural resources and allow them to contribute to the planning process of the Katingan
Project. The implementing partner was Yayasan Puter, and the project took place from July
2012 – July 2013.
2.2. Internationally operated financial support mechanisms This section discusses financial support originating from foreign donors that has been used
and/or potentially could be used to finance PES/REDD+ activities in Indonesia that are
operated by a foreign entity. This section covers both bilateral commitments and multilateral
cooperation for international development. Finally, this section also focuses on financing
support options relevant to LESTARI, though some options (like REDD+ Early Movers -
REM) are not yet applicable to Indonesia.
Internationally operated development finance available to PES/REDD+ activities in
Indonesia mainly has two targets: climate change mitigation (and/or adaptation) and
conservation. Several of the nationally operated funds discussed above are supported by
this development finance as well, but this section will focus on funds mainly under
international operation. A succinct overview of the climate-related development finance
landscape focusing on REDD+ follows and provides a useful introduction to the current
situation.
The relationship between funding channels (multilateral vs. bilateral) and financial
instruments (equity vs. grants vs. loans) are established in the OECD study “Development
Assistance Committee dataset: Climate-related development finance in 2013”.
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Figure 8: Total bilateral and multilateral ODA committed to the forestry sector 201311
Source: (OECD 2013)
The amount of funding available as international climate finance (committed, not pledged)
has varied over the years, with considerable linkages and crossover with multi-purpose
funding. The year 2013 saw a significant drop in overall funding available for climate change
mitigation.
Figure 9: Total bilateral ODA to reduce GHG emissions in the forestry sector12
Source: (OECD 2013)
Norway has dominated bilateral donor commitments since 2009, allocating more than double
the amount of that of Germany, the donor with the second largest commitments. The World
11 For all developing countries with climate mitigation as a principal or significant objective, by channel and financial
instrument 12 Committed to all developing countries, by whether climate mitigation was a principal objective or a significant objective, 2002-2013.
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Bank dominates multilateral donor commitments with more than triple the amount of that of
the second largest donor, the Forest Investment Program.
Figure 10: Total commitments to REDD+ by donor type, 2009-2014
Source: (Chávez, Schaap and Breitfeller 2015)
Represented as a time series, it is notable that REDD+ Finance Commitments peaked in
2009 and, after a small recovery in 2012, marked their lowest fully recorded year yet in 2014.
The main difference here is in public sector finance commitments, with voluntary carbon
markets increasing their contribution to land-based climate change mitigation efforts in 2014.
Figure 11: REDD+ finance commitments by donor type, 2009-2014
Source: (Chávez, Schaap and Breitfeller 2015)
Land use activities supported by international development partners have focused on
capacity building and strengthening enabling environments by far. In addition, most
international development partner finance was delivered through contractors or international
groups as opposed to through the Indonesian government or local organizations.
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2.2.1. Norway – Indonesia REDD+ partnership
Eligibility Appointed Ministry/Agency in a country (MoEF)
Funding Mechanism Grants in 1st and 2nd phase, result-based finance/carbon credits in 3rd phase
Size of Funding Available
USD 1 billion in three phases
Funding Disbursement Under development
Note USD 200 million for Phase 1 and 2; USD 800 million for Phase 3
Norway and Indonesia have entered into a partnership to support Indonesia’s efforts to
reduce GHG emissions from deforestation, forest degradation and peatlands. A Letter of
Intent (LoI) between the Government of Norway and the Government of Indonesia on
cooperation on REDD+ was signed on 26 May 2010. Norway will support these efforts by
providing funding for up to USD 1 billion in three phases. In the first phase, funds will be
devoted to finalizing Indonesia’s climate and forest strategy and putting in place enabling
policies and institutional reforms. Phase 2 aims to prepare Indonesia for non-market based
payments for performance in the form of verified emission reductions (VER), while at the
same time initiating larger scale mitigation actions through a province-wide pilot project. In
the third phase, contributions for the VER mechanism are expected to be implemented
nationally.
A series of project phases and expected outputs on each phase is illustrated in the following
figure.
Figure 12: Phases of Norwegian fund based on LoI
Source: HPI elaboration based on (BP REDD+ 2014)
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This partnership follows the government to government scheme, in which funds can be
accessed when the national government approves funding support that is dedicated to
climate change and environment related programming, including REDD+ in the national
budget.13 Funding is allocated on the basis of deliverables, channeled through an agreed
financing mechanism. The partnership is performance-based, both in terms of actual
emission reductions and with regards to policy change and institutional reforms required.
This means that funding will depend on the program being executed according to these
agreed principles, and will be assessed annually by an independent third party review group.
The Government of Norway has contributed USD 30 million in Phase 1 to the achievement
of institutional development of REDD+, an extension of the moratorium, completion of the
National REDD+ Strategy and the Strategy and Action Plan for Provinces (Strategi dan
Rencana Aksi Provinsi - SRAP), development of a Monitoring, Reporting, and Verification
(MRV) system and review of licensing. An interim phase (Phase IIA) was designed to bridge
some of the important work that was not completed in the preparation phase and also to
prepare a solid foundation for the transformation and implementation phases. In this interim
phase, the Government of Norway is contributing USD 10 million.
The creation and operationalization of the National REDD+ Agency is an important
milestone for REDD+ implementation in Indonesia as it triggers the second phase of the
program. This agency, however, was dissolved in January 2015 and no funding has been
disbursed since. Out of a total of USD 200 million allocated for Phase I and Phase II, less
than half has been spent as of today. Phase IIA was halted due to the dissolution of the
National REDD+ Agency, and some activities under this phase, including the
operationalization of pilot projects, were also halted. As a result, Phase IIB, which was
initially planned to commence in March 2015, has not yet started and most likely will
experience further delays in its implementation.
One of the core aspects of the LoI is the development of a funding instrument to channel
support from the international community. The REDD+ Task Force and the National REDD+
Agency created this fund, which was known as Financing REDD+ in Indonesia (FREDDI).
FREDDI is supposed to operate under a mandate from the National REDD+ Agency, which
defined its strategy, scope, and scale of funding activities.14 By the time the National REDD+
Agency was dissolved in January 2015, FREDDI was not yet operational.
The Norwegian funds are currently managed on an interim basis by the REDD+ Unit under
the UNDP Environmental Division. UNDP’s management is projected to continue until June
2016 or until another institutional mechanism is set up by the government. The UNDP
REDD+ Unit currently manages USD 12 million and oversees the continuation of programs
in transitional phases which were previously implemented by the REDD+ Agency, namely:
Prevention of forest and peat land fire in five fire prone provinces, namely West
Sumatera, Riau, Jambi, Central Kalimantan and Central Sulawesi
13 Please see http://www.wri.org/sites/default/files/norwegian_fast_start_finance_contribution.pdf 14 http://www.unorcid.org/upload/UNORCID_-_The_Funding_Instrument_for_REDD_in_Indonesia_-_AUG_2015.pdf
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Law enforcement and review of laws on licensing, and compliance auditing for fire
prevention
Improvement of community welfare, land management, and sustainable forests
through social forestry
Land-related conflict resolution
Participative land mapping by local and customary communities and institutional
strengthening, stakeholder involvement and awareness raising on social economic
issues, as well as environmental issues related to Phase 2 preparation
At the time of writing, UNDP REDD+ had carried out activities in community-based fire
management (CBFM), and, specifically in Central Kalimantan, assisted the MoEF in
supporting a community group artesian well program in Jumpun Pambelun. Canal blocking
is another priority program in Central Kalimantan that is expected to be implemented in the
near future.
The Government of Indonesia will establish a new institutional arrangement for managing
the Norwegian Fund and will eventually take over its administration from the UNDP REDD+
Unit. However, milestones and timelines for this transition have yet to be set and candidate
institutions/agencies also need to be determined. Current developments indicate that the
MoF will most likely take over the management of the Norway funds. The MoF is planning to
establish a new BLU called BLU Climate Change (BLU Perubahan Iklim) to be the next fund
administrator. This BLU will serve as the administrator of all funds related to climate finance.
The ICCTF that is currently managed by BAPPENAS and funds managed by the Center of
Forest Development Financing (Pusat Pembiayaan Pembangunan Hutan – Pusat P2H) at
the MoEF are envisioned to be merged into the administration of this new BLU. Additionally,
FREDDI, which was not yet operational when the REDD+ Agency was dissolved, is also
expected to come under the management of the BLU. The government is currently
formulating a draft regulation that will serve as the legal basis for the establishment of this
new mechanism. This plan, however, has a high level of uncertainty in terms of the timeline
involved and the institutional arrangements, resulting from the structure of Indonesian
government organizations and the overlapping roles and functions of government institutions
(MoEF, MoF, and BAPPENAS) in climate finance.
2.2.2. Forest Investment Program (FIP)
Eligibility Appointed Ministry/Agency in a country (MoEF)
Funding Mechanism Grants & Loans
Size of Funding Available
FIP I: USD 17.5 million (grant); expected co-financing
USD 6 million
FIP II: USD 17.5 million (grant); expected co-financing
USD 8 million
FIP III: USD 2.5 million (grant) & USD 32.5 million (loan) expected co-financing USD 6 million
Funding Disbursement Through Multinational Development Banks (MDBs) and their respective disbursement regulations (see Table 5)
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The FIP is a program under the Strategic Climate Fund that provides funding to support
developing countries in reducing deforestation and forest degradation and to promote
sustainable forest management that leads to emission reductions and enhancement of forest
carbon stocks. The World Bank is the trustee of the Strategic Climate Fund and provides
secretariat services through the Climate Investment Funds (CIF) Administrative Unit.
The eligibility criteria of the FIP are:
a. Countries that meet eligibility criteria of Official Development Assistance (ODA)
b. An active Multilateral Development Banks (MDBs) country program15
In November 2012 Indonesia was selected by the FIP sub-committee as one of eight pilot
countries. FIP in Indonesia will be administered by the ADB, IBRD, and the IFC, and will be
executed by the MoEF.
FIP activities in Indonesia are focused on three inter-related themes.
Table 5: FIP activities in Indonesia
Program Project title Focus of activities Managing
Institutions
FIP I Community-focused investments to address deforestation and forest degradation
Institutional development
forest enterprises and CBFM
community capacity
ADB
FIP II Promoting Sustainable Community Based Natural Resource Management and Institutional Development
Institutional development
community capacity
IBRD
FIP III Strengthening Forestry Enterprises to Mitigate Carbon Emissions
Forest enterprises and CBFM
IFC
Source: (Climate Investment Fund 2012) and second public consultation FIP II, 2014
An additional amount of up to USD 6.5 million is available under the Dedicated Grant
Mechanism (DGM) 16 for customary law communities (Masyarakat Hukum Adat). The
additional resources may be used to: (i) build institutional capacity, forest governance and
information; (ii) mitigate GHG emissions from the forest sector, including through supporting
forest ecosystem services; and (iii) support measures outside the forest sector to reduce the
pressure on forests, such as through the creation of alternative livelihood and poverty
reduction opportunities.
15 ‘Active’ program means where MDB has a lending program and/or policy dialogue with the country. 16 Indonesia Forest Investment Program TOR for the Second Joint Mission (12-16 December 2011)
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Table 6: FIP funds allocation
Program MDB
FIP amount (USD million)
Expected co-financing (USD
million) Sector
Grant Loan Total
FIP I ADB 17.5 17.5 6.0 Public
FIP II IBRD 17.5 17.5 8.0 (DANIDA) Public
FIP III IFC 2.5 32.5 35.0 99.0 Private
Source: (Climate Investment Fund 2012) and Second public consultation FIP II, 2014
All provinces in LESTARI landscapes are selected for potential FIP interventions.
FIP I: Community-focused investments to address deforestation and forest
degradation
FIP I aims to reduce GHG emissions from forests in Sintang and Kapuas Hulu district in
West Kalimantan province. The province is one of the top five provinces contributing to GHG
emissions from deforestation, with a mean deforestation rate of 132,500 ha per year.
Specific activities include REDD+ activities to be implemented in 17 villages and 5 FMUs;
activities to strengthen local, provincial and national governmental forest institutions; and the
harmonization of REDD+ related policies at different institutional levels.
Table 7: FIP I activities and collaborating institutions
Collaborating institutions Primary role
MDBs partner
ADB Managing implementation and FIP grant financing
Co-financing Confirmed: ADB, GEF/SFM, Government of Japan. Under discussion: Government of Germany (KfW/GIZ), Government of the USA (USAID, Dept. of State, Millennium Challenge Corporation), others to be confirmed.
Technical and in-kind co-financing
Government Ministry of Environment and Forestry Executing Agency
Coordinating Ministry for Economic Affairs;
Ministry of Finance
Coordination
West Kalimantan Provincial Government
Provincial-level implementation
Sintang and Kapuas Hulu district District-level implementation
Direct
Stakeholders
Local community institutions, including customary institutions
Partners in activities and
beneficiaries of incentive schemes
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Collaborating institutions Primary role
Forest Management Unit (KPH) Institutions
Implementing unit at pilot site
Local Government Technical Implementation Units (UPT)
Partners in activities and training
participants
Private Sector Inputs to activities and participants of incentive schemes
Source: (Climate Investment Fund 2012)
FIP II: Promoting sustainable community-based natural resource management and
institutional development
FIP II aims to complete the MoEF’s plans to address the problems of governance and
management of forest resources. The ultimate objective is to reduce greenhouse gas
emissions and enhance carbon stocks while generating livelihood co-benefits.
Table 8: FIP II activities and collaborating institutions
Collaborating institutions Primary role
MDBs partner
IBRD Managing implementation and FIP grant financing
Co-financing IAFCP Co-financing for spatial planning and community activities
FCPF Co-financing for policy dialogue, baseline data collection
Danida
Government Ministry of Environment and Forestry
Policy reform on REDD+, steering and internalization of FIP into KPH units
National Land Agency Policy on village level spatial planning
Ministry of Home Affairs
Guidance on and facilitation of KPH institution, engagement of province and district governments, and village economic empowerment
Bappenas Policy and steering
Ministry of Agriculture Collaboration on village level spatial planning and improvement of local economy
BAPPEDA Collaboration on spatial planning
Provincial governments Partners and beneficiaries of capacity building activities
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Collaborating institutions Primary role
Direct
Stakeholders
Local community Beneficiaries of community level planning and economic activities within KPHs and in buffer zones
Village and other local community institutions, including customary institutions
Partners in activities, including KPH-based
activities, and beneficiaries of incentive schemes
Selected KPH Institutions
Site level project management, partners and beneficiaries of capacity building activities
Source: (Climate Investment Fund 2012)
FIP III: Strengthening of Forest Enterprises to Mitigate Carbon Emissions,
administered by the International Finance Corporation (IFC)
FIP III aims to strengthen the productive capacity and business skills of forestry enterprises
and firms in other related sectors, by leveraging private sector investment. IFC will work with
its partners to promote sustainable forest management, leading to emission reductions and
protection of forest carbon stocks. The MoEF will serve as the lead government agency with
IFC serving as the lead MDB for investment and technical assistance initiatives oriented
towards private sector enterprises in the forestry sector, in addition to other associated
sectors that affect forests. Other partner agencies and stakeholders are presented in the
table below.
Table 9: FIP III activities and collaborating institutions
Collaborating institutions Primary role
MDB and co-financier
IFC Managing implementation and FIP concession and grant financing and providing technical assistance
Commercial banks, credit unions and financial institutions
Co-financing
Bilateral donors Technical assistance grant
Government agencies
MoEF Steering committee
Coordinating Ministry of Economic Affair, MoF, Ministry of Crafts, SMEs
National level coordination
Private forest ownership, KPH Provincial and district level execution
Contractors Operations, technical and business service
Cooperatives Member based woodlot and marketing operations
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Collaborating institutions Primary role
Groups of smallholders Smallholder woodlot operators, participant
NGOs Strengthening capacity of small business
Source: (Climate Investment Fund 2012)
2.2.3. Forest Carbon Partnership Facility (FCPF)
Eligibility An eligible REDD+ country (through Ministry or other Government Agency)
Funding Mechanism Grants (Readiness Fund & Carbon Fund)
Size of Funding Available
(global, not just Indonesia)
Total fund capital of USD 850 million, as of March 2015
Readiness Fund: 3.85 million (TBC)
Carbon Fund: USD 465 million (total)
Funding Disbursement Grants
The FCPF has two separate but complementary funding mechanisms — the Readiness
Fund and the Carbon Fund. Both funds are underpinned by a multi-donor fund of
governments and non-governmental entities, including private companies that make a
minimum financial contribution of USD 5 million.
The FCPF has created a framework and processes for REDD+ readiness17, which helps
countries prepare themselves for future systems of financial incentives for REDD+ by
developing the necessary policies and systems. The Carbon Fund will provide payments for
VER from REDD+ programs in countries that have made considerable progress towards
REDD+ readiness.
The World Bank is the trustee of both the Readiness Fund and the Carbon Fund and
provides secretariat services through a Facility Management Team (FMT).18 The FMT
administers the funds and makes proposals to the FCPF Participants Committee (PC)19, and
provides country advisory services and REDD+ methodology support. It ensures that FCPF
operations comply with applicable policies in the areas of safeguards, procurement and
financial management.
Currently, the Forestry Research and Development Agency (FORDA) at the MoEF is the
managing agency for the FCPF. The contact person for the FCPF is Prof. San Afri Awang of
17 Please see https://www.forestcarbonpartnership.org/design-process 18 A group of World Bank staff which coordinates and oversees the work of the FCPF. It is housed within the bank’s Carbon
Finance Unit, which is in the Environment Department. The FMT team includes staff with regional, legal and carbon finance
experience. They are also the point of contact for civil society. 19 The governing body of the FCPF charged with making decisions on all aspects of importance to the readiness process-including approving the templates for R-Plans, the criteria and standards for their assessment, and their approval. The PC also approves the annual operating budget of the FMT.
%202014.pdf 22 Please see https://www.forestcarbonpartnership.org/carbon-fund-methodological-framework 23 Please see https://www.forestcarbonpartnership.org/er-pins-fcpf-pipeline
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Programs submitted to the Carbon Fund will have to meet the following criteria:
Focus on results, namely high-quality and sustainable emission reductions, including
social and environmental benefits;
Sufficient scale of implementation, e.g., at the level of an administrative jurisdiction
within a country or at the national level;
Consistency with emerging compliance standards under the UNFCCC and other
regimes;
Diversity, so as to generate learning value for the FCPF and other participants;
Clear mechanisms so that the incentives for REDD+ reach those who need them;
and
Transparent stakeholder consultations.
The Carbon Fund will remunerate the selected countries in accordance with negotiated
contracts for verifiably reducing emissions above those in the reference scenario. The
Carbon Fund’s payments are intended to provide an incentive to the recipient countries and
the various stakeholders - including forest-dependent indigenous peoples, other forest
dwellers or the private sector - to achieve long-term sustainability in financing forest
conservation and management programs. This would help reduce the negative impact on
the global climate from the loss and impoverishment of forests.
Indonesia submitted its ER-PIN to the FCPF on 5 September 2014 with the ER Program
Name “Indonesia District Level REDD+ ER Program”.24 The ER PIN was developed by the
Ministry of Forestry25 and the REDD+ Agency26, with support from various stakeholders in
central and local government agencies, as well as national and local NGOs. There are seven
locations of ER programs in Indonesia: Kutai Barat and Berau (East Kalimantan); Kapuas27
(Central Kalimantan); Donggala and Tolitoli (Central Sulawesi); and Merangin and Bungo
(Jambi).28
The FCPF program in Indonesia aims to accelerate transformative reforms in forest and land
governance through the scaling-up of the development of FMUs, improvements in land and
spatial planning, site-specific community-based activities, and management of forest
concessions and estate crops. These emission reduction programs under the FCPF Carbon
Fund are part of Indonesia’s national REDD+ initiative and as such will include activities
closely matched to the national REDD+ strategy and activities at the provincial level. By
focusing on sub-national implementation initially, the program will generate important
lessons that can be applied to other forest-rich parts of the country in a phase approach and
inform the broader national REDD+ strategy.
24 Please see https://www.forestcarbonpartnership.org/sites/fcp/files/2014/september/Indonesia%20ER-
PIN%20September_12_resubmitted_edit_final.pdf 25 Currently merged with Ministry of Environment. 26 The REDD+ Agency was dissolved in January 2015. 27 The preliminary list of key local partners in Kapuas district are Kalimantan Forest Carbon Partnership (KFCP), Kapuas
Customary Dayak Council, Tahanjungan Tarung Foundation, Petak Danum Foundation, Inter Village Communication
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Milestones of Indonesia’s activity under the FCPF are summarized in the following figure.
Figure 15: Milestones of Indonesia’s activity under FCPF
Source: (FCPF 2014)
Currently, FCPF only works with readiness grants at the national level. If ERPA
implementation for performance-based payments was initiated, LESTARI emission reduction
monitoring should be harmonized with the national reporting and benefit distribution
mechanisms discussed.
2.2.4. REDD Early Movers (REM)
Eligibility Ministry/institution in a country (MoEF)
Funding Mechanism Grants
Size of Funding Available
-
Funding Disbursement -
Note Not available for Indonesia
REM has a funding volume of EUR 32.5 million, and REM has already agreed to spend around EUR 19 million buying 8 million tons of CO2 from REDD+ activities in the state of Acre over a four-year period
REDD Early Movers (REM) currently only operates in Colombia, Ecuador and Brazil and
does not currently accept applications from other countries. REM contributes to the
application of this approach in selected countries. REM supports REDD pioneers, also called
Early Movers, who are already taking the initiative themselves in forest conservation for
climate change mitigation. The program rewards the climate change mitigation performance
of “Early Movers” and promotes sustainable development for the benefit of small-scale
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farmers as well as forest-dependent and indigenous communities through fair benefit
sharing. KfW Development Bank makes payments for independently verified REDD
emission reductions achieved by Early Movers. The REM partner countries make their own
contribution in order to keep the complexity of risk management low.
REM has a funding volume of EUR 32.5 million, and has already agreed to spend around
EUR 19 million buying 8 million tons of CO2 from REDD+ activities in the state of Acre over a
four-year period. Contact: Daniel Haas BMZ Bonn/Division 311 dahlmannstrabe4, 53113
Eligibility Accredited Entities: accredited national, sub-national, regional, and international implementing entities and intermediaries (including NGOs, government ministries, national development banks, and other domestic or regional organizations that can meet the fund’s standards); and the private sector
Additional info Indonesia is still developing a framework for the National Designated Authority (NDA) establishment and the issues of accredited entity
Two Indonesian institutions pursuing AEs: Sarana Multi Infrastruktur Ltd. (PT. SMI) and KEHATI foundation
The GCF is a multilateral climate fund within the framework of the UNFCCC for investing in
climate change mitigation and adaptation in developing countries, primarily based on
contributions from industrialized countries. The purpose of the fund is to promote the
paradigm shift towards low-emission and climate-resilient development pathways. In
allocating its resources, the fund aims for a 50:50 balance between mitigation and
adaptation over time. The fund also aims to allocate a minimum of 50% of the adaptation
allocation to particularly vulnerable countries, including least developed countries (LDCs),
small island developing states (SIDS) and African states.
One element of the GCF that supports developing countries is the Readiness Program.29
The Secretariat works closely with various international organizations such as the United
Nations Environment Program (UNEP), World Resource Institute (WRI), the UNDP climate
29 The Readiness Program prepares developing countries to effectively and efficiently plan for, access, manage, deploy and
monitor climate financing. One of the key activities is to help develop pipelines of national projects in line with countries’
climate change strategies, plans and policies while involving the private sector. The lessons learned will be shared with the
GCF Board and Secretariat and with other initiatives dedicated to enhancing climate finance readiness.
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finance readiness program, the GIZ and KfW climate finance ready initiatives, and the Asian
Development Bank (ADB) readiness programs to ensure complementarity.
The GCF will finance projects in the public and private sectors that contribute towards
achieving at least one of the eight strategic impacts of the fund30, where projects will be
evaluated against the fund’s investment criteria: impact potential, paradigm shift potential,
sustainable development, responsive to recipients’ needs, promotion of country ownership,
and efficiency & effectiveness. The fund has identified five investment priorities that will
deliver major mitigation and adaptation benefits, one of them related to forestry, that is
aimed at scaling up finance for forests and climate change.
Access to GCF resources to undertake climate change projects and programs is possible
only through Accredited Entities (AEs). AEs can submit funding proposals to the fund at any
time. The GCF board will only consider funding proposals that are submitted with a formal
letter of no objection. An AE may submit a concept note for feedback and recommendations
from the GCF, in consultation with the NDA or Focal Point. Considering the recommendation
of the Technical Advisory Panel, the GCF board decides whether the concept is endorsed,
not endorsed with a possibility of resubmission, or rejected.
The flow of the GCF approval process is illustrated in the following figure.31
Figure 16: Flow chart for GCF initial proposal approval process
Source: (Green Climate Fund 2015)
30 Classified in two broad categories: (1) Mitigation strategic impacts – reduced emissions from: (i) transport, (ii) energy
generation and access, (iii) forest and land use, and (iv) buildings, cities, industries, and appliances; and (2) Adaptation
strategic impacts – increased resilience of: (i) health, food and water security, (ii) livelihoods of people and communities,
(iii) infrastructure and built environment, and (iv) ecosystem and ecosystem services. 31 More detailed information on the GCF proposal approval process can be found by following this link:
http://www.gcfund.org/fileadmin/00_customer/documents/Operations/4.2_Project_Approval_Process.pdf; the criteria for
program and project funding can be downloaded at this link:
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The GCF has approved its first eight projects including two from SIDS (Fiji and the Maldives)
and three from LDCs (Bangladesh, Malawi and Senegal) (Climate Analytics 2015).
Indonesia Focal Point/NDA Contact Info:
Indonesia has financially contributed USD 250,000 to the GCF and has recently undergone
a national political transition, leading to changes in national institutional arrangements
including the closure of climate finance institutions such as The National Council on Climate
Change (DNPI), which previously played the role of the GCF focal point in Indonesia.32 The
new NDA to the GCF for Indonesia is:
Dr. Suahasil Nazara Chairman of Fiscal Policy Agency Email: [email protected] Secretariat: Center for Climate Change and Multilateral Policy (PKPPIM) Fiscal Policy Agency Ministry of Finance of Indonesia
Contact Person: Mr. Syurkani Ishak Kasim (Director) R.M. Notohamiprodjo Building 5th Floor Jl. Dr. Wahidin No. 1 Jakarta 10710 Indonesia Phone: +62 21 3483 1678 Fax: +62 21 34831677 Email: [email protected]
There are currently 20 GCF AEs in the world. In additional to national entities, there are
regional and international entities that can access and implement projects globally, such as
Conservation International (CI), Deutsche Bank, UNEP, UNDP, ADB, and the World Bank.
Indonesia is still in the process of developing a framework for the establishment of the NDA
and is also working on the accreditation of new AEs. As of today, there are two Indonesian
institutions pursuing GCF accreditation, namely PT. SMI and KEHATI foundation.33 GCF
accreditation is a long and intricate process that makes it difficult to predict. Additionally, AEs
can only access the fund for certain types of fiduciary functions, size of project/activity, and
environmental and social risk category.
GCF Private Sector Facility (PSF)
Eligibility All developing country Parties to the UNFCCC through Accredited Entities (AEs): commercial banks regulated by central banks, private equity houses, investment firms and funds, impact funds, regulated financial intermediaries, development banks
Funding Mechanism Senior debt, subordinated debt, equity, guarantees, and
grants
Size of Funding Available
Under definition
32 DNPI used to be the authority administering the GCF, and has been merged into the MoEF. 33 Criteria of accredited institutions can be found in this link:
development banks and other financial intermediaries for climate change projects and
programs. It also provides financing to financial intermediaries for climate change projects
and programs. The PSF can be used to finance activities implemented by large, medium,
small, and micro enterprises. Non-accredited private sector entities can potentially access
GCF funds through accredited local financial intermediaries. The GCF approved its first eight
projects in November 2015, with discussions regarding several criteria still continuing.34
2.2.6. Global Environment Facility (GEF) managed funds
Eligibility Government agencies, civil society organizations, private sector companies, research institutions
Funding Mechanism Grants (can be transferred to or blended with loans, guarantees, equity)
Size of Funding Available
Various types of projects (modalities):
Full-sized Projects (FSPs) – over USD 2 million,
Medium-sized Projects (MSPs) – up to USD 2 million,
Enabling Activities (EAs) - up to USD 1 million,
Small Grants Program (SGPs) – up to USD 50,000,
Programmatic Approach – amount not defined.
Funding Disbursement
Through Implementing Entities like UNDP, UNEP and the World Bank
Additional Info Focus of GEF Trust Fund biodiversity, climate change, land degradation, sustainable forest management, international waters, and chemicals.
Focus of the Special Climate Change Fund (SCCF) and Least Developed Countries Fund (LDCF): climate change adaptation
The GEF has provided USD 14.5 billion in grants and mobilized USD 75.4 billion in
additional financing for almost 4,000 projects since its establishment in 1992.35 The GEF has
become an international partnership of 183 countries, international institutions, CSOs, and
34 Please see http://www.greenclimate.fund/-/green-climate-fund-approves-first-8-investmen-1 35 Please see https://www.thegef.org/gef/whatisgef
OFP since 2015-08-20 Ministry of Environment and Forestry Manggala Wanabakti Building Jl. Gatot Subroto, Senayan Jakarta 10270, Indonesia Tel: +62 21 5720210
In addition, the OFP can guide the project proponent in avoiding duplication of
activities, in case a similar project has already been funded. To access the list of all
GEF-funded projects in Indonesia, including an overview of the country’s allocation
and utilization, visit https://www.thegef.org/gef/country_profile
36 Please see https://www.thegef.org/gef/STAR/GEF6_country_allocations 37 Please see https://www.thegef.org/gef/focal_points_list 38 Please see https://www.thegef.org/gef/npfe
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ii. Meet the eligibility criteria. For a project or program to be considered for GEF-
funding, it must fulfill the following eligibility criteria:
a. It has to be undertaken in an eligible country.39
b. It has to be country-driven and consistent with national priorities. All GEF
projects should be based on national priorities designed to support sustainable
development.
c. It has to address one or more of the GEF focal area strategies.40
d. It has to seek GEF financing only for the agreed-upon incremental costs on
measures to achieve global environmental benefits.
e. It has to be endorsed by the OFP of the country. For regional projects and
programs, the endorsement of the OFPs of all participating countries is required.
For global projects, an endorsement letter is not required.
f. It must involve the public in project design and implementation, following
the Policy on Public Involvement41 in GEF-Financed Projects and the respective
guidelines.
iii. Choose a GEF Agency.42 The GEF Agency (e.g. UNDP, UNEP or World Bank) is
responsible for the development and implementation of projects and programs. This
means that the GEF Agency will be the proponent’s partner at all stages of the
project. The choice of the agency should be based on its respective comparative
advantages as stated in the document Comparative Advantages of the GEF
Agencies Corrigendum.43
iv. Select a type of modality. The GEF provides funding through four modalities: full-
sized projects, medium-sized projects, enabling activities and programs. The project
proponent should select the one that best fits the idea to be developed into a
proposal. Depending on the type of modality selected, different templates have to be
completed describing the project proposal for its review and approval.
v. Civil Society Organizations have the opportunity to apply for GEF grants through
the Small Grants Program. 44
Additional details in the review and approval of these projects can be found under the
policies and guidelines of the Project Cycle45 and the Templates and Guidelines46 on the
GEF website.
39 Please see https://www.thegef.org/gef/country_eligibility . In other words, countries are eligible for GEF funding in a
focal area if: (i) they meet eligibility criteria established by the relevant COP of that convention, (ii) they are members of the
conventions and are countries eligible to borrow from the World Bank (IBRD and/or IDA), (iii) they are eligible recipients
of UNDP technical assistance through country programming. 40 Please see https://www.thegef.org/gef/GEF6-Programming-Directions 41 Please see https://www.thegef.org/gef/policies_guidelines/public_involvement 42 Please see https://www.thegef.org/gef/gef_agencies 43 Please see https://www.thegef.org/gef/node/428 44 Please see https://www.thegef.org/gef/sgp 45 Please see https://www.thegef.org/gef/project_cycle 46 Please see https://www.thegef.org/gef/guidelines_templates
UKCCU programs under the operational plan of 2011-2016 completed their spending in
2015. However, the impacts on reducing deforestation and promoting low carbon investment
are expected to continue beyond that. The post-2015 results will be fully reported by the
UKCCU if it continues operation beyond 2015. If the UK introduces different institutional
arrangements in Indonesia, provision for reporting results will be incorporated into these
plans.
2.2.8.3. Germany – GIZ and KfW
At governmental negotiations in November 2013, the governments of Germany and of
Indonesia agreed that bilateral development cooperation should focus on three priority
areas:
(i) Energy and climate change
(ii) Inclusive growth
(iii) Good governance and global networks
The official partner for German development cooperation in Indonesia is BAPPENAS. GIZ
and KfW are the German development organizations that implement German international
development projects and programs. GIZ and KfW work together in supporting the
Indonesian German Forests and Climate Change Programme (FORCLIME) projects in
Indonesia, in which GIZ provides technical support while KfW provides financial support for
project implementation.
Deutsche Gesellschaft fuer Internationale Zusammenarbeit GmbH or GIZ
GIZ, the German development agency, currently has three programs in Indonesia, namely
the (i) Forests and Climate Change Program (FORCLIME), (ii) Biodiversity and Climate
Change Project (BIOCLIME), and (iii) Policy Advice for Environment and Climate Change
(PAKLIM).
FORCLIME – GIZ and KfW
The overall objective of FORCLIME is to reduce GHG emissions from the forest sector while
improving the livelihoods of Indonesia's poor rural communities. Support to REDD+
demonstration activities is a key feature of the program, providing decision-makers with
49 Program Design for Spatial Planning and Low Carbon Development in Papua is supported by the UKCCU. The UKCCU
allocated GBP 280,000 over eight months (September 2011 – Aril 2012). The fund is paid out on the basis of invoices
submitted after Month 2, Month 4 and on completion of the assignment (Intervention Summary).
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experience of how REDD+ can be implemented on the ground. FORCLIME support comes
from GIZ and KfW, and the program runs from 2009 – 2016.
FORCLIME is commissioned by the German Federal Ministry for Economic Cooperation and
Development (BMZ) with the MoEF as the lead executing agency. With FORCLIME,
Germany supports Indonesia’s efforts to reduce GHG emissions from the forestry sector, to
conserve forest biodiversity within the regional Heart of Borneo Initiative, and to implement
sustainable forest management. The support provided by FORCLIME includes, among
others: advice on strategy development for REDD+ and forest development at national,
provincial and district levels; development of PES schemes to support sustainable
livelihoods in rural areas; innovative design of mechanisms and regulations for district-
based REDD+ initiatives; MRV facilitation; and capacity building for sustainable forest
management and nature conservation.
FORCLIME consists of six components:
(i) Regulatory framework (advisory services on forestry and climate policy)
(ii) Sustainable forest management and REDD+50
(iii) FMU establishment51
(iv) Sustainable economic development (green economy)
(v) Support for capacity building
(vi) Integration of biodiversity conservation
GIZ - BIOCLIME
BIOCLIME’s overall objective is to preserve biodiversity and the carbon sequestration
capacity of selected forest ecosystems of South Sumatra as a contribution to the
implementation of Indonesia’s emissions reduction target. BIOCLIME supports district and
provincial governments in their efforts to develop and implement conservation and
management concepts for reducing emissions from their forests and conserving forest
biodiversity in order to contribute to the GHG emission reduction goal and the achievement
of the Aichi biodiversity target in Indonesia. The project partner organization is the MoEF as
the leading ministry in the forestry and biodiversity sector and the government of the
province of South Sumatera as the implementing partner.
BIOCLIME cooperates with different levels inside the Indonesian government, with NGOs
and universities, as well as with local communities. It places emphasis on building bridges
between district and provincial governments and providing a toolset for decision making on
policy and land use planning suitable for leading to a national standard and supporting the
Indonesian One Map Policy.
BIOCLIME is designed to act as a coordinating unit for all relevant activities in this field. It
does this by further developing data management and associated capacities, and by
50 FORCLIME supports private forest companies in the FSC certification process of their forest concessions, particularly
companies located in the pilot districts Berau, Malinau and Kapuas Hulu. 51 FORCLIME actively supports the development of three Model FMUs in Malinau District in North Kalimantan Province,
Berau District in East Kalimantan, and Kapuas Hulu District in West Kalimantan.
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improving the reporting system with special attention to the development of FMU. BIOCLIME
consists of five work packages:
(i) Establishment of a database for the conservation and sustainable management
of areas of high biodiversity
(ii) Shaping of transparent and participatory planning and decision-making
processes for the selection and management of protected areas
(iii) Strengthening of management capabilities and capacities
(iv) Development and implementation of an adapted local MRV system for land use,
biodiversity, risk potential and biomass
(v) Improvement of livelihoods of the local communities living in the area
GIZ - PAKLIM
GIZ PAKLIM is commissioned by the German Federal Ministry for Economic Cooperation
and Development (BMZ) and the lead executing agency is the MoEF. The overall term for
PAKLIM was 2009 – 2015. The objective of PAKLIM was to reduce GHG emissions, improve
living conditions, make industrial energy use more efficient and help the country adapt to
climate change. GIZ PAKLIM consists of three working areas:
Work Area 1: Climate mitigation policy advice, with the following main objectives: (i)
implement climate mitigation action plans and disseminate best practices at the
provincial level, and (ii) support Nationally Appropriate Mitigation Action (NAMA)
development and an MRV system
Work Area 2: Industries and industrial estates, with the main objective of integrating
private sector actors into mitigation actions, fostering voluntary partnerships and
development partnerships
Work Area 3: Climate education and awareness, with the main objective of raising
awareness for the reasons for and the impact of climate change among Indonesian
youth
The PAKLIM program has helped develop a national strategy for the introduction of
mitigation measures in relevant sectors to achieve Indonesia’s targets for GHG emission
reductions. The main elements of this strategy are found in the guidelines on implementing
the National Mitigation Action Plan (RAN-GRK), which were drawn up jointly with the Ministry
of National Development Planning. With assistance from PAKLIM, the Ministry of National
Development Planning is currently setting up a secretariat that will support the relevant
ministries and provincial authorities in preparing NAMAs and implementing the RAN-GRK.
Partnerships for the development of climate change action plans have been established with
ten cities in Indonesia, namely: Blitar, Malang, Mojokerto, Yogyakarta, Surakarta, Pasuruan,
Probolinggo, Semarang, Salatiga and Pekalongan.
KfW Development Bank
The KfW forestry portfolio in Indonesia includes REDD+, biodiversity and integrated
watershed management, ecosystem restoration, and the ASEAN regional program. KfW
provides financial support under the FORCLIME program in Kalimantan and also cooperates
with other organizations such as the Frankfurt Zoological Society (ZGF) in Sumatera. The
first program to support the three districts in Kalimantan was launched in 2008 and up to
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EUR 80 million will be invested in sustainable forestry by 2022. With its commitment in the
FORCLIME program, KfW seeks to demonstrate the viability of a pro-poor REDD+
mechanism in Kalimantan. KfW uses a district-based approach in order to prepare selected
pilot areas for national and international carbon markets. KfW finances measures to achieve
readiness in three districts of Kalimantan (Kapuas Hulu, Malinau, Berau), realizes an
investment program for REDD+ demonstration activities and develops an innovative and fair
incentive payment scheme.
KfW also supports two big national parks in Sumatra and Sulawesi, combined with the
rehabilitation of important water catchment areas. In Sumatera, KfW supports climate
change mitigation and species conservation in the Leuser ecosystem of Sumatra, which falls
under the LESTARI landscape in Aceh. The project aims to support sustainable
management of the Gunung Leuser ecosystem in Sumatra, in particular in the South Aceh,
Subulussalam and Singkil districts. The primary objective of the project is to balance the
needs for conserving biodiversity with those of the population for using the natural
resources. The implementing partners for the project are the MoEF, Natural Resources and
Ecosystem Conservation (Ditjen Konservasi Sumber Daya Alam dan Ekosistem, KSDAE),
Regional Body for Planning and Development (BAPPEDA) Aceh, local planning and forestry
authorities (BAPPEDA, Dinas Kehutanan), Gunung Leuser National Park (Taman Nasional
Gunung Leuser, TNGL), and the Regional Natural Resources Conservation Agency (Badan
Konservasi Sumber Daya Alam, BKSDA) Singkil. The project runs from August 2013 – April
2019 with a grant totaling EUR 8.5 million.52
Still in Sumatera, KfW also supports a conservation concession for the protection of critically
endangered Sumatran orangutans. KfW will support provision of 39,000 hectares of tropical
rainforest in Bukit Tigapuluh in central Sumatra for the reintroduction of more than 300
orangutans into their natural habitat. The implementation of the concession is funded via the
KfW Development Bank at almost EUR 3.6 million.
2.2.9. Market-based payments for emission reductions (compliance &
voluntary)
Eligibility VERs following respective market protocols
Funding Mechanism Over-the-counter (OTC) transaction of VERs against payment
Size of Funding Available
See below
Funding Disbursement See Funding Mechanism
Market-based payments for emission reductions from land-based mitigation have leveraged
USD 1.2 billion since 2002, including USD 0.9 billion from voluntary markets. The 2014
transaction volume for voluntary land-based emission reduction payments was USD 128
million.
52 Please see https://www.kfw-entwicklungsbank.de/International-financing/KfW-Development-Bank/About-
The following are the procedures for proposal submission:
KEHATI will send a letter of proposal receipt to the party who proposed the
activities within two-weeks at the latest, after the proposal has been received by
KEHATI.
The proposal will be assessed and evaluated by an Independent Proposal Evaluator,
consisting of experts related to the theme of the proposal.
54 Based on Law No.8 Year 1995 concerning Capital Market and its implementing regulation. 55 Please see http://www.kehati.or.id/en/indeks-sri-kehati-2.html 56 Please see http://www.kehati.or.id/en/kemitraan-3.html
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Evaluation will be completed within one month after the deadline of proposal
submission.
KEHATI will inform the proposal sender of the evaluation result within one month, at
the latest, after the evaluation process is completed.
The following table summarizes eligibility of KEHATI grants:
Table 13: Eligibility of KEHATI grants
Eligible Institutions and Organizations57
Non-eligible Institutions and Organizations58
NGOs and volunteer organizations All government institutions, not including research institutions owned by universities and state higher educational institutions
Educational and training institutes Commercial private and public companies, national and international as well
Religious groups, cultural groups, youth organizations, students, women organizations
Cooperatives and government-sponsored associations
Professional associations and groups of experts
Labor and entrepreneurs’ associations
- Military and para-military organizations
- Political organizations and international organizations
The World Wide Fund for Nature (WWF) Indonesia does not receive financial support from
the government budget (APBN and APBD). It’s funding comes from more than 40 donors
57 Organizations formed by local communities. 58 KEHATI cannot channel its grant to individuals for certain educational purposes, conferences, travelling, building,
renovation, purchase or ownership of land and buildings or purchase of vehicles and other equipment.
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(international and national), aid agencies, and a total of more than 64,000 supporters from
across Indonesia. WWF obtains 57% of its funding from individuals and from endowments,
17% from international sources (such as the World Bank, DFID, USAID) and 11% from
various companies59.
To support its programs, WWF Indonesia develops an innovative partnership model to
collaborate with companies in the form of the Corporate Partnership Program. This
Partnership Program can be packed in accordance with the needs of nature conservation
but also encourages corporate partners to contribute through transformation, communication
to the public and CSR. In addition, WWF also carries out fundraising activities. Fundraisers
deal directly with the public and convey the issues of preservation and conservation of
nature and a green lifestyle, as well as raise support in the form of individual donations. In
addition, WWF Indonesia has also partnered with professional institutions that specialize in
organizing fundraising activities.60
WWF also developed a trust fund initiative, the Sumatera Sustainability Fund (SFS)61, an
initiative of sustainable financing for a conservation program in Sumatera Island. The SFS is
a trust fund that aims to support 10 governors on ecosystem-based spatial planning. WWF
has several grants that can be applied by local organizations in LESTARI landscapes, such
as Reforestation Grants62 and Conservation Workshop Grants.63
2.3.2. Private companies
In general, private companies including international consumer goods companies (Unilever,
Nestlé, L’Oreal and others) organize their CSR activities in non-standardized ways. This
means that there is no public grant window or selection process for proposal requirements.
Companies operating in this landscape usually have their own CSR program.
In relation to becoming involved with sustainable palm oil growers beyond simple RSPO
sourcing, one consumer goods company gave the feedback that they felt their position was
too distant from local agricultural production and they encouraged their suppliers of refined
palm oil, e.g. Wilmar, Golden Agri Resources etc., to take leadership in this regard.
A more direct and common way that consumer goods companies invest in local sustainable
landscape and climate change mitigation initiatives is through the purchase of verified
emission reductions via the voluntary carbon market. A direct link to the supply chain (e.g.
palm oil) can act as a strong asset for attracting specific buyers, along with the other social &
environmental co-benefits associated with REDD+. Voluntary carbon market transactions
have a tendency to be small and irregular, also incurring transaction costs. A current trend of
advanced CSR-motivated buyers of forest carbon credits is to move away from the “broad
portfolio of credits off the shelf” to support one or a few strategic projects on amore long-term
basis. This lends predictability to the project and reduces transaction costs at both ends.
59 Please see https://id.wikipedia.org/wiki/World_Wide_Fund_for_Nature 60 Please see http://www.wwf.or.id/cara_anda_membantu/fundraiser_wwf2/ 61 SSF was initially established by six founders on 12 February 2010 in Jakarta and was facilitated by Indonesian
Coordinating Minister for the Economy in collaboration with WWF-Indonesia. 62 Please see http://www.worldwildlife.org/projects/reforestation-grants 63 Please see http://www.worldwildlife.org/projects/conservation-workshop-grants
Eligibility NGOs, community organizations, private sector implementing organizations
Funding Mechanism Grants from CSR and demand for sustainably produced commodities
Size of Funding Available
Variable
Funding Disbursement Variable
Several consumer goods companies operate CSR programs, with the aim of making their
supply chain more environmentally responsible. In September 2014, 37 national and 20
subnational governments, 53 companies and institutions, 16 indigenous community
networks, and 54 civil society organizations committed to halving deforestation by 2020 and
ending it by 2030. The private sector signatories represent USD 1.36 trillion in annual
revenues connected in part to the “big four” deforestation-driving commodities: palm oil, soy,
beef, and pulp and paper. Most of these companies – including household names such as
Walmart, L’Oreal, Danone, McDonald’s and General Mills – have defined specific targets to
reduce deforestation within their supply chains, with deadlines fast approaching. There are
another 270 companies with similar commitments not tied to the declaration but otherwise
documented by the Supply Change64 project collaborators.
The Unilever Sustainable Living Plan is a company blueprint for achieving Unilever’s vision
to double the size of its business, whilst reducing its environmental footprint and increasing
positive social impact.65 It consists of three components, namely: (i) improving health and
wellbeing, (ii) reducing environmental impact, and (iii) enhancing livelihood. The plan sets
wide-ranging targets to achieve these goals by 2020 and includes how the company sources
raw materials and how consumers use the brand’s products.
Unilever intends to fully source its agricultural raw material sustainably by 2020. Unilever’s
ultimate objective is to ensure that its supply chain is deforestation-free. It will strive for a net
positive environmental impact and for improved livelihoods of smallholder farmers. For
instance, Unilever aims to be able to say and to prove that all palm oil purchased by the
company comes from traceable and certified sustainable sources. As of December
2014, Unilever was able to trace 70% of its global palm oil purchases to 1,800 known crude
palm oil mills.66
In August 2015, Unilever teamed up with WWF to reach the wider public with its green
campaign Bright Future, which focuses on protecting trees in Indonesia and Brazil.67
Specifically, the partnership between Unilever and WWF will fund projects in Brazil and
Indonesia that focus on reducing deforestation and forest degradation, restoring forest
areas, promoting sustainable forest management and increasing tree stocks in agricultural
64 Please see www.supply-change.org 65 Please see https://www.unilever.com/sustainable-living/ 66 Please see http://blog.cifor.org/28657/in-indonesia-corporate-commitment-to-sustainable-palm-oil?fnl=en 67 Please see www.brightfuture.unilever.co.id
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landscapes. The tree protection program68 is part of Unilever’s commitment to sustainable
living and will help fund the protection of one million trees in Brazil and Indonesia. The
partnership supports a long-term program by WWF and their partners, BirdLife International
and The Wildlife Conservation Society.
2.3.1.4 Freeport
Operating in Mimika District, PT. Freeport Indonesia has carried out various CSR programs,
mainly directed towards two indigenous communities in the area: Amungme and Kamoro.
Two dedicated local organizations were set up to manage the CSR fund from PT. Freeport
for these community groups, namely Lembaga Masyarakat Adat Suku Amungme (LEMASA)
for the Amungme tribal group and Lembaga Masyarakat Adat Suku Kamoro (LEMASKO) for
the Kamoro tribal group. Freeport has its own mechanism for operating its CSR programs
through a foundation called Lembaga Pengembangan Masyarakat Adat Amungme dan
Kamoro (LPMK), where it has a set of programs and a management plan.
2.3.1.5 Kalimantan Gold Corporation Ltd.
Kalimantan Gold Corporation Ltd. (locally known as PT Kalimantan Surya Kencana), a
mineral exploration company operating in Central Kalimantan, has been conducting a CSR
program operated by Yayasan Tambuhan Sinta (discussed in more detail in Section 4.2.2).69
The CSR program mainly focuses on improving the quality of life of Dayak villagers living
close to a mineral concession in the upper Kahayan River by minimizing the effects of
mercury in its operation.
68 A program to protect a million trees by supporting forest protection programs in Brazil and Indonesia. 69 This company created Yayasan Tambuhak Sinta (YTS) to spearhead its commitment to improving the local economy and
social welfare.
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3. DEVELOPMENTS TO BE MONITORED This section describes new financial instruments that may be established and are potentially
applicable for ultimately financing LESTARI. Potential actors that may become involved or
new programs that could incentivize sustainable rural landscape management in Indonesia
through PES/REDD+ are discussed (Forest Trends' Ecosystem Marketplace 2015).
Public REDD+ finance: Several pledges exist from bilateral initiatives and multilateral
development banks to strongly increase their climate finance by 2020. Public REDD+
finance should have a sizeable share of the USD 100 billion goal for global climate finance
by 2020. ADB said it would more than double its spending to USD 6 billion in the same year.
The World Bank said it would increase its commitments to climate change by a third - which
at current funding levels would mean USD 16 billion a year, with the potential to leverage an
additional USD 13 billion from other funders.70 Unfortunately, at this point there is no clarity
on i) when these pledges will be realized as committed funds, and ii) through which bilateral
or multilateral mechanisms (GCF, GEF or others) these would be realized and how much
would be earmarked for sustainable landscapes and destined for sub-national activities.
Aviation negotiations: To meet its goal of keeping global net carbon emissions from the
aviation sector at 2020 emission levels post-2020 (and precluding the invention of no-carbon
jet fuel), the International Civil Aviation Organization (ICAO) will need to develop a market-
based mechanism to offset its emissions, until technological advances will allow the sector to
reduce its emissions below 2020 levels again. Offsets are likely to be a key component, and
the ICAO is considering including Certified Emission Reductions (CERs) from the Clean
Development Mechanism (CDM) and/or REDD+ offsets in what would be the first sectoral
ETS. The details may be ironed out in time for ICAO’s next triennial meeting in 2016. This
could become relevant as a revenue stream to sell verified GHG ERRs under a program like
the VCS.
Internal carbon pricing: Currently, 437 companies now calculate an internal price on
carbon, according to CDP – more than triple the number from the previous year. Another
583 said they plan to start putting a price on carbon within two years. Nearly a third of the
companies that internally priced carbon in 2013 were also engaged in carbon offsetting,
according to an Ecosystem Marketplace analysis of CDP data. Buyers such as Microsoft,
The Walt Disney Company, TD Bank, Aviva, and Barclays charge their business divisions
according to their emissions and use a portion of the revenue to purchase offsets. As more
companies put an internal price on carbon, more may turn to offsetting to neutralize
unavoidable emissions. This could also become relevant as a revenue stream to sell verified
GHG ERRs under a program like the VCS.
70 Please see http://www.bloomberg.com/news/articles/2015-11-30/climate-finance-programs-reap-41-billion-in-pledges-in-
paris
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Ecosystem-based impact investment: In response to a survey by Nature Vest and Eko
Asset Management Partners, 51 private investors indicated that they intend to deploy
USD 5.6 billion in conservation impact investments before 2018 – almost triple the
USD 1.9 billion they spent between 2009 and 2013. About 3% of past investment
(USD 58 million) went to land-based funding mechanisms such as REDD+. This would mean
that in the years before 2018, up to USD 200 million could be available as finance for land-
based funding mechanisms. Investors said the limiting factor to growth is not available
capital but rather a shortage of deals with the appropriate risk/return profiles. Public-private
partnerships could help address this challenge. For example, the Althelia Climate Fund
found a way to reduce risks to its REDD+ investors by securing a USD 133.8 million loan
guarantee from the US Agency for International Development.71 At this point though, the
Althelia fund is closed and not sourcing new GHG ERR projects.
Ecosystem Green Bond: A concept where a sovereign-issued bond covers an ecosystem
on a larger scale, deemed worthy of protection, and uses the proceeds to finance any
conservation-related activities in this ecosystem. The protected ecosystems could be a
system of terrestrial national parks or marine parks. The sources of repayment would be the
cash-flow generated from activities by the ecosystem (e.g. user fees for access to parks). To
reduce risk and pricing and increase appeal, full or partial repayment would be guaranteed
by the sovereign or an international finance institution. The size of this bond would depend
on the relevant ecosystem. Coupon payments would be in line with the issuer’s credit rating.
The successful placement of such mainstream investment products in the market could be
crucial in lifting conservation finance to the next stage (Global Canopy Program, 2015). In
2014, USD 4.2 billion72 was already seen in agriculture/forestry green bonds, in 2015 it was
USD 2.3 billion73. A key issue for compatibility of LESTARI PES/REDD+ activities with green
bonds are investment grade economic activities that hold a solid expectation of Internal Rate
of Return (IRR) on which a bond could be issued.
Government Peatlands Restoration Agency (Badan Restorasi Gambut - BRG).
Responding to severe forest fire in 2015, the government set up an agency which reported
directly to the President through Presidential Regulation No.1 Year 2016, issued on 16
January 2016, with the main task of overcoming and preventing peatland fires. This agency
is commissioned to coordinate and facilitate peatland restoration in seven priority provinces,
namely: Riau, Jambi, South Sumatera, West Kalimantan, Central Kalimantan, South
Kalimantan and Papua. The BRG is obliged to plan and implement a peatland ecosystem
restoration program over five years (2016 – 2020) across an area of 2,000,000 ha, with an
annual target area of 30% in 2016, 20% in 2017, 20% in 2018, 20% in 2019, and 10% in
2020. The priority areas for the planning and implementation of this target will begin in
Pulang Pisau District in Central Kalimantan, Musi Banyuasin District and Ogan Komering Ilir
District in South Sumatera, and Meranti Islands District in Riau. In addition, Norway is also
planning to provide support to this agency. The development of the BRG is worth monitoring
as its work plan may have activities related to PES/REDD+ and is closely aligned with
LESTARI’s focus in Central Kalimantan.
71 Please see https://www.usaid.gov/news-information/press-releases/may-28-2014-us-government-althelia-climate-fund-
mobilize-1338-million-forest-conservation 72 Please see https://www.climatebonds.net/bonds-climate-change-2014 73 Please see http://www.climatebonds.net/files/files/CBI-HSBC%20report%2010Nov%20JG.pdf
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Table 15: List of KPHs in LESTARI landscapes
Landscape Districts/
Conservation Area
FMU/KPH Operational
Status Remarks
ACEH
Leuser
Aceh Tenggara KPHL Region
VI Legally operational
Area: Aceh Tenggara, Aceh Selatan, Subulussalam Regencies Aceh Selatan
Aceh Barat Daya
- - -
Gayo Lues KPHL Region III
Legally operational
Area: Aceh Tengah, Gayo Lues Regencies
Leuser National Park*
National Park Agency
Legally operational
-
Singkil Wildlife Sanctuary*
KPHK Rawa Singkil
Legally operational
-
CENTRAL KALIMANTAN
Katingan – Kahayan
Katingan KPH Katingan
Organizational design
Need further confirmation on the type of KPH (L/P)
Pulang Pisau
KPHL Pulang Pisau
KPHP Pulang Pisau
Organizational design
KPHL will be established first, followed by KPHP
Gunung Mas KPHP Gunung Mas
Legally operational
KPH Model
Palangkaraya KPH Palangkaraya
Organizational design
Need further confirmation on the type of KPH (L/P)
Bukit Baka Bukit Raya National Park*
National Park Agency
Legally operational -
Sebangau National Park*
National Park Agency
Legally operational
-
PAPUA
Lorentz Lowlands
Mimika KPHL Mimika Legally
operational -
Asmat - - -
Lorentz National Park*
National Park Agency
Legally operational
-
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Landscape Districts/
Conservation Area
FMU/KPH Operational
Status Remarks
Mappi-Bouven Digoel
Mappi - - -
Bouven Digoel KPH Bouven Digoel
Organizational design
Need further confirmation on the type of KPH (L/P)
Sarmi Sarmi
KPHP Lintas Sarmi & Memberamo Raya
KPH Sarmi
Legally operational
Organizational design
KPHP Model
Need further confirmation on the type of KPH (L/P)
Cyclops
Jayapura Regency
KPH Jayapura Regency
Organizational design
Need further confirmation on the type of KPH (L/P)
Jayapura City KPH Jayapura City
Organizational design
Need further confirmation on the type of KPH (L/P)
Cyclops Nature Reserve*
KPHK Cyclops75
Organizational design
Will serve as KPHK model
* Conservation area
Source: HPI elaboration
Unlike KPHs in other provinces, the KPHs in Aceh are unique and can serve as a model for
KPH establishment as they follow watershed boundaries. This means that the KPH
boundaries are tangent to each other, which is beneficial for developing an REL approach
because wall-to-wall mapping and prediction of land use change can be applied.76
Therefore, options for developing the sub-national REL baseline calculation for the JNR
approach are less challenging for Aceh province.
Ministry of Finance (MoF)
The MoF is responsible for ensuring that climate change requirements are reflected in
budget priorities, pricing policies, and financial market rules (Center for Climate Change and
Multilateral Policy (PKPPIM) 2016). It has two divisions that have tasks related to climate
finance: the Division of Debt Management that has a finance tracking role, and a Fiscal
Policy Office (Badan Kebijakan Fiskal – BKF) that sets the fiscal policy. Through the
PKPPIM, the BKF has been actively conducting studies on benefit sharing mechanisms for
PES,77 and is currently setting up a new funding mechanism in the form of an “umbrella
75 The FMU/KPH organizational structure has been designed by BPKSDA Papua. 76 VCS REDD methodology using JNR approach, applied to “wall to wall” boundary. 77 Please see http://www.fiskal.kemenkeu.go.id/2010/adoku/2014%5Ckajian%5Cpkppim%5CGPB%20Strategy.pdf
Local Manage district/city protection forests and other relevant natural protected areas - (now limited to managing grand forest parks).
Manage permits in the respective districts/cities - (no longer applicable).
Control / monitoring
MoEF National to local
Supervise activities in protection forests.
Provincial government
Province Supervise activitiesin protection forests - (no
longer applicable).
District/city government
Local Supervise activitiesin protection forests - (no
longer applicable).
Source: (CIFOR 2015) available at: http://www.cifor.org/publications/pdf_files/OccPapers/OP-132.pdf
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6. CONCLUSIONS This chapter synthesizes the main outcomes of the information collection and analysis
process of the previous chapters. The focus lies on general opportunities and challenges
relevant to LESTARI’s future planning. Valuable key messages regarding contextual
awareness are also presented. Based on these conclusions, final concrete
recommendations are developed on how to harness opportunities and overcome challenges
in Chapter 7.
6.1. Focal point of coordination for funding opportunities
A focal point of coordination is vital for properly managing distribution of funds from various
sources of funding, co-financing, and partnership opportunities to finance PES and REDD+
activities in the landscape. LESTARI could facilitate the flow of funds from donors or fund
managers to organizations in the landscape through a focal point of coordination. The need
to coordinate and improve the capacity of LESTARI staff and stakeholders on fund
management, including grants and fund applications, was already highlighted in the
LESTARI Quarterly Report – First Quarter of Year 1 (October – December 2015).
This can be done by the strengthening capacity of LESTARI’s staff that deal with funding
both at the national and landscape level. Among various possible activities that could be
carried out by the focal point of coordination is the development of a LESTARI co-financing
architecture which is both a comprehensive business plan and incentive structure for
REDD+/PES activities as much as an instrument to attract public and private as well as
domestic and international finance. The financial architecture will have to describe how the
provision of incentives and funds are re-financed, disbursed, replenished; how cash flow is
managed; and how fiduciary and guarantee procedures are set up. In other words, it should
explain and justify all elements of the proposed financial management scheme, and depict
and detail all financial mechanisms, flow of funds and financial provisions.
6.2. Financing opportunities and mechanisms for
LESTARI
There are a number of funds in Indonesia’s climate finance arena (both international and
domestic) that can be used to finance PES/REDD+ activities in the LESTARI landscapes.
However, the utilization of these funds has not reached their maximum potential due to
capacity issues of the institutions managing them and/or the political dynamics within the
institutions.
The size of domestic funding directed towards sustainable forest management in Indonesia
exceeds international funding by far (Angela and Glenday 2016). As illustrated in Figure 5 in
Chapter 2, domestic funds were mainly channeled through budget transfer instruments and
the bulk of them supported “indirect” activities, with most support going to the forestry sector.
Domestic funding sources are relatively straightforward and can be accessed by local
community groups in a more cost effective way, with less stringent requirements on proposal
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development and report writing. The majority of domestic funds are already disbursed and
implemented on the ground. These funds, however, face common and persistent challenges
in management, oversight, and optimized use for the benefit of local communities.
The Village Fund is one of the few funds that is directly managed at the village level, as
opposed to other types of government funds that are usually administered at the national or
district levels. If managed properly through a participatory approach, the Village Fund would
have a better chance of contributing to local community development with stronger local
ownership. In addition, district/city governments facilitating the flow of funding from central
government to the villages are still in need of various types of assistance. Embedded in a
larger framework of sustainable landscape management, the fund could overcome some
barriers of scale and institutional coordination. The Village Fund could be a prime source for
performance-based PES funding in the landscapes. For this, building on local experiences
such as the Timber Harvesting Postponement Credit (Kredit Tunda Tebang - KTT) (see
section 2.1.7) and international best practices of PES will be important. This discussion is
continued as a final recommendation in section 7.1
The Government Disaster Relief Agency (BNPB) considers forest fires to be a national
disaster and aims at shifting more resources, including the National Disaster Relief Fund,
towards prevention activities. This is aligned with the LESTARI focus on community-based
forest fire management in the Katingan-Kahayan Landscape in Central Kalimantan. The
Watershed Fund offers various programs targeting local communities living around
prioritized watersheds, such as the Nursery Program (Kebun Bibit Rakyat – KBR) and BLM-
PPMPBK. Synergies and LEDS programmatic alignment of the National Park Fund
supporting activities for communities in the national parks inside LESTARI landscapes
should be sought where possible. In addition, activities supported by PNPM Mandiri
Kehutanan can also be aligned and leveraged by LESTARI.
For international funding, the Norway – GoI partnership is the largest pledged fund for forest
conservation for Indonesia. Although there have been operational challenges, the likelihood
of this fund being transferred and spent is ultimately large. LESTARI should closely monitor
ongoing developments in the MoF and MoEF and explore ways to be ready once payments
towards sub-national activities are on the agenda. The GCF, the largest international climate
fund, is a prospective new funding opportunity worth pursuing by LESTARI. Unlike many
other international funds, the GCF supports activities managed by sub-national
governments, NGOs and the private sector that should increase the likelihood of success.
Directing capacity building workshops towards relevant actors at the MoEF and MoF, as well
as local governments, could further achieve this goal. In addition, having solid M&E and
MRV frameworks in operation will position LESTARI well. This discussion is continued as a
final recommendation in section 7.3.
LESTARI can develop joint initiatives and organize joint activities with private companies
operating in the landscapes through their CSR programs to create synergy. Despite their
vision to become a “carbon balanced” company and efforts to reduce GHG emissions in
their supply chain, consumer goods companies seem to show little interest in being involved
with sustainable palm oil growers beyond simple RSPO sourcing. The companies view their
position in the supply chain as being too distant from local agriculture. A more direct and
common way that consumer goods companies invest in local sustainable landscapes and
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climate change mitigation initiatives is through the purchase of VERs via the voluntary
carbon market.
6.3. Maintaining the potential for renewable energy
development
Rural electrification with renewable energy in LESTARI landscapes at lower costs and with
independence from fossil fuel expenses is one of the catalysts for sustainable development.
Use of renewable energy sources such as hydropower and biomass are an alternative to
fossil fuel use for decentralized electrification of villages. Where watersheds offer potential
for micro-hydro installations, these should be given preference. Renewable energy initiatives
increase resource efficiency in the rural green economy, relieve households of expenditures
related to purchasing fuel, enable alternative income streams from non-forest dependent
local businesses through energy cost reductions, and reduce GHG emissions (FAS et all.
2013). In addition, a simple calculation suggests that investment in a 10-15 kW micro-hydro
or micro-biomass-gasifier system is lower than the investment required for generators and
their fuel costs for five years.81
Hydropower plants and biomass gasifier power plants require fuel from renewable sources
that can be obtained from sustainable forest management or solid waste management
practices. In turn, revenue earned from hydropower and biomass operations can be used to
finance sustainable forest management or waste management activities. Forest
conservation for maintaining the potential of renewable energy is therefore aligned with
LESTARI SEA-LEDS.
Biomass and micro-hydropower in the landscapes present not only a high number of co-
benefits and enabling value, but also have large up-scaling potential and connection with
other USAID objectives such as sustainable rural development, economic growth and
promotion of renewable energies.
Financing schemes from public and private sources as well as from commercial banks either
from international or domestic sources can be used to finance the initial investment of
renewable energy power generation. Developing the skills of local communities is essential
for maintaining effective power plant operations. At the same time, establishing a network of
technical experts would also reduce risks associated with the investment and help to raise
the awareness of the wider community, government and the private sector.
A series of watershed and forest conservation activities can create an enabling environment
for renewable energy development within the LESTARI landscapes. LESTARI can
collaborate with USAID Indonesian Clean Energy Development (ICED) to move forward with
the development of renewable energy, including setting up a pilot project within the
LESTARI landscapes. Southeast Aceh and Gayo Lues are the ideal places for a hydropower
81 Generally, micro-hydro can be installed at the cost of USD 2000 – 3000/kW capacity. The investment cost often depends on the quality of product and services installed on a particular site. For instance, simple operation of micro-hydro power may cost only USD 1000 – 1500/kW, but its reliability will be questionable (engine operations may not last more than two years).
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pilot project due to the importance of watersheds in these areas. Renewable energy
development is also aligned with Gayo Lues’ vision to become diesel free by 2017, a
program of the District Government Office of Mining and Energy (Dinas Pertambangan dan
Energi Kabupaten).
HPI has a strong track record on renewable energy consultancy in Indonesia and is ready to
design an approach for watershed conservation, conduct an initial survey, undertake risk
assessments, and develop capacity of local communities in support of watershed and forest
conservation.
Biomass is another potential renewable energy where biomass gasifier power plants can be
fed from sustainable forest management practices or solid waste materials from palm oil
mills or plantation operations. However, development of a biomass gasifier power plant from
scratch, including the establishment of sources of biomass, requires a lot of work, making it
impractical for LESTARI in most landscapes. A biomass gasifier power plant is best
developed in a location where biomass waste is already available. Thus, cooperation with
palm oil plantations producing biomass waste is a possible scenario to explore further.
6.4. Challenges of regulatory frameworks and
institutional readiness
Both the regulatory framework and institutional capacity to implement PES/REDD+
mandates in LESTARI landscapes are not yet at an operational stage in most cases.
Incomplete regulations on PES/REDD+ in Indonesia across all administrative levels and the
lack of practical examples of successfully implemented PES schemes in Indonesia inhibits
the implementation of such mandates. Continued relationship building, capacity building and
co-creation of opportunities will have to continue in order to identify institutional
arrangements with concrete pathways for co-finance acquisition and distribution.
The majority of potential actors (government and non-government) in the landscapes do not
have sufficient capacity to implement PES/REDD+ related activities. If a specific
PES/REDD+ initiative is envisioned to be developed in the landscapes and all implementing
partners are clearly identified, a more detailed capacity assessment and long-term capacity
building plan would need to be further developed. The capacity building programs should
include developing understanding on the PES/REDD+ concept and its benefits to the local
community, and should also emphasize management aspects (organizational and financial)
of PES/REDD+ for actors managing distribution of incentives.
While institutional reform and regulatory changes in Indonesia have had success in some
sectors since 2009, there has been limited progress towards delivery of integrated climate
change mitigation, climate finance and results based payment schemes, including PES and
REDD+. These types of activities have not meet all expectations as there are still obstacles
for stakeholders interested in sustainable landscape management. The complexity of
Indonesian governance is highlighted in CPI’s report, which stated that Indonesia has
persisting weaknesses in its enabling environment that impede efficient land use
investments (Angela and Glenday 2016). Such issues include both technical and non-
technical aspects including lack of financial management as well as limited capacity of
institutions and human resources. Efforts in recent years to explore new and more efficient
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ways of cooperation and increasing aid effectiveness such as the Indonesia-Norway results-
based agreement have encountered hurdles and have yet to deliver at the envisaged scale
or pace.
Following the dissolution of the REDD+ Agency and incorporation of its role into the MoEF,
the GoI has been working on institutional arrangements and mechanisms for managing the
Norway funds and the eventual takeover of the interim administration from the REDD+ Unit
under the UNDP Environment Division. However, debate on which institution should play
this role in the future is currently still underway. Current developments indicate that the MoF
will most likely takeover the management of the Norway funds and other climate related
funds (including the ICTTF and previous funding instrument - FREDDI) with its plan to
establish a new BLU - Perubahan Iklim. This plan, however, has a high level of uncertainty
regarding its timeline and institutional arrangements, considering the architecture and
overlapping roles and functions of several government institutions (MoEF, MoF, and
BAPPENAS) in climate finance. If the plan to establish a new BLU under the MoF is not
realized, it is likely that the BLU of BP2HP under the MoEF will be the most important
government institution managing climate funds in Indonesia. The government is currently
drafting a regulation on the Reforestation Fund (Dana Reboisasi) that is currently managed
by the BLU-BP2HP, with the strong possibility of expanding the use of the fund for PES. The
need to engage with the BLU for future financing opportunities is further discussed as a
recommendation in Section 7.3.
6.5. Challenges of PES/REDD+ design and
implementation
The design and communication of any PES initiative should take into account previous PES
type schemes in Indonesia and the key lessons that are applicable to the sites of interest.
Success stories from Lombok and West Java emphasize the role of multi-stakeholder
governance and participatory planning, while other experiences highlight the importance of a
clear communication plan. The expectation of local stakeholders and communities of
receiving large and timely allocations of funds from PES schemes will have to be
strategically managed from the beginning. It is essential to define a very clear
communication strategy on PES and align all involved staff and facilitators.
A clearly defined and iteratively revised communication strategy on PES timing and
expectations for local facilitators can help to maintain interest and commitment while
avoiding misunderstandings, disappointment and frustration throughout the process. When
referring to potential direct payments to public budgets, households or stakeholders, it will be
essential to explain: (i) the conditionality of payments, (i) timelines and (iii) gateways to their
effective introduction. It will be important to be clear about the fact that the payments, their
amounts, their disbursement schedules and other elements are still to be defined. Many of
these aspects are very hard to define at an early stage, but questions about these issues
can come up very early in stakeholder consultations. It’s therefore advisable to take a
cautious approach in order to avoid creating frustrating expectations and endangering the
Free Prior Informed Consent (FPIC) process in landscapes.
Financial incentives for sustainable forest management can also come in the form of low
interest loans brokered by domestic public and private financial actors. The support of banks
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with a national or provincial branch network can greatly advance the distribution of PES
payments or low-interest loans. A relevant example is the KUR (section 2.1.4 & Annex 3).
Internationally, the Amazon Sustainable Foundation developed a partnership with a national
bank to outfit signatories to its PES/REDD+ scheme with a free bank account where PES
money accumulated monthly until farmers came to town – as long as they were found in
compliance with the system’s rules (FAS et all. 2013). Such schemes around bank
accounts and micro-credit schemes should be integrated into consideration of co-finance
distribution and local PES implementation mandates.
The importance of the voluntary forest carbon market should not be overestimated as a
source for the majority of performance-based payments. Still, being ready to report soundly
monitored GHG emission reductions can be relevant for accessing finance via international
carbon markets and donors and investors. Both Norway funds and the GCF are
considering performance-based payments for sub-national PES/REDD+ activities. The
creation of a credible asset of GHG ERRs achieved and monitored against a solid baseline
is a multi-purpose effort related to both internal M&E and external MRV frameworks.
The requirement of performance monitoring will continue to be a core aspect both on the co-
finance acquisition and PES activity finance front. Results-based finance such as from the
Norway-GoI partnership or carbon market demand fulfillment of their respective M&E or
MRV frameworks. Likewise, local PES schemes will only create tangible results when
payments for ecosystem services are linked to the monitored performance of local actors to
incentivize behavioral changes. Therefore, the integration of existing LESTARI M&E
frameworks with GHG MRV and local ecosystem service providers demands attention.
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7. RECOMMENDATIONS Based on the criteria provided by LESTARI and the conclusions of the analysis, HPI regards
the following recommendations as realistic and achievable initiatives to be pursued in the
next four years. The proposed recommendations will contribute to achieving four indicators
in the AMEP:
Indicator 4: number of public policies addressing climate change and/or biodiversity
conservation introduced, changed or adopted consistent with citizen input
Indicator 12: number of people receiving United States Government (USG)
supported training in natural resources management and/or biodiversity conservation
Indicator 13: amount of investment mobilized (in USD) for climate change as
supported by USG assistance
Indicator 14: number of people receiving livelihood co-benefits (monetary or non-
monetary)
An indicative work plan with an overview of the temporal integration of initiatives is available
in Annex 7.
7.1. Incorporating PES in the utilization of domestic
funds
LESTARI should work with and advise the district government and village administrator to
allocate a certain percentage of the Village Fund for environmental purposes and to
incorporate PES based on the priorities and specific needs of a village. This can be done by
gaining experience around the implementation of the Village Fund and obtaining stakeholder
feedback on their wishes and interests.
A village or district level PES will most likely come with a village regulation (peraturan desa)
or a district level regulation (peraturan daerah) as part of the process. This will help achieve
indicator 4 of LESTARI, and also help address one of the LCP’s recommendations for
Southeast Aceh – “the need to establish an umbrella law at the district level and a more
detailed law at village level that sets out the provisions on the management of the natural
resources in Southeast Aceh District.” A pilot project in Southeast Aceh should be given first
priority due to the already existing advocacy efforts at the district and village levels (see
Section 7.5.1). Replication of this initiative in other districts in the landscape will magnify the
impacts.
In addition to the Village Fund, LESTARI should consider partnerships with BPDAS for
incorporating PES into programs funded by the Watershed Fund, and should also seek
close cooperation with the BNPB in utilizing the Disaster Relief Fund for forest fire
prevention management in Central Kalimantan (see Section 7.4.3). The Cyclops landscape
in Papua could be another focus area.
HPI is ready to support LESTARI’s efforts at all levels, from village to national, in the
necessary development of concepts, presentations, stakeholder consultations, workshops,
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and concept notes in order to direct a portion of the Village Fund towards LESTARI’s PES
schemes (see section 7.5).
7.2. Supporting the establishment of Climate Change
BLU under the MoF
Despite the dynamic arrangement of the management of climate finance within the
government, there is an opportunity for LESTARI to tap into government funding in its
current form or under the proposed new arrangement. LESTARI should support advocacy
efforts in climate finance at the national level and also provide technical assistance and
capacity building on how results-based payments can be introduced. If the plan to establish
a new Climate Change BLU (BLU Perubahan Iklim) under the MoF is realized, LESTARI
should organize a workshop to present its project and initiatives in need of support or co-
financing. LESTARI should support capacity building programs for the BLU aimed at
improving the BLU’s capacity in managing funds, particularly with regards to project
management skills (both financial and technical aspects). This should be done in such a way
to promote LESTARI landscapes to the BLU. If the plan to establish a new BLU under the
MoF does not materialize, LESTARI should approach the BLU of BP2HP under the MoEF,
who will be the most important institution managing climate finance in Indonesia.
To facilitate this, LESTARI needs to cooperate with USAID Build Indonesia to Take Care of
Nature for Sustainability (Bangun Indonesia dengan Jaga Alam untuk Keberlanjutan -
BIJAK), which focuses more on advocacy efforts at the national level. HPI is ready to
support LESTARI’s capacity building and advocacy efforts through its relevant networks, and
through the organization of events, workshops, presentations and publications. As a result of
its strong relations with both the MoF and MoEF, gained from extensive work in the technical
and policy aspects of climate finance, HPI can provide continuous advisory services on the
optimal positioning of LESTARI in the dynamic climate finance landscape of Indonesia at the
national level.
7.3. Accessing the GCF and Norway funds
PES schemes, forest fire management in Central Kalimantan (section 7.5), and conserving
forests for creating an enabling environment for village electrification using renewable
energy (section 6.3), are all eligible activities for climate change mitigation under the GCF
and Norway funds. These two international funding opportunities are by far the most
promising and worth pursuing. HPI recommends launching a concerted effort to access GCF
and/or Norway funding for LESTARI landscapes with clear deliverables of progress within 12
months.
The GCF is an exciting new funding opportunity as it is the largest international climate fund
with USD 10 billion of initial capitalization and has just started project selection for financing
(see section 2.2.5). The fund has identified five investment priorities that will deliver major
mitigation and adaptation benefits, one of them related to forestry, which aims at scaling-up
finance for forests and climate change. In addition, the GCF might also start making result-
based payments for sub-national REDD+ soon to support mitigation and adaptation actions.
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The key issue in accessing the GCF is the need to apply through Accredited Entities (AEs),
whereby an AE can only access the fund for certain types of fiduciary functions, sizes of
project/activity within a program, and under certain environmental and social risk categories.
Becoming a GCF AE is a long and intricate process, which is not practical for temporary
programs such as LESTARI. Recent intelligence suggests that partnering with already
established AEs promises to be a more cost-effective approach than trying to become a
newly accredited entity. LESTARI can partner with regional and international entities that
can access and implement projects globally, such as Conservation International (CI),
Deutsche Bank AG, UNEP, UNDP, ADB, and the World Bank. The progress of PT. SMI and
KEHATI Foundation in becoming Indonesia’s GCF AEs is also worth monitoring.
For the GCF, this fund access push should result in a clear gateway decision after
approximately three months and scoring of LESTARI landscape activities for funding
probability under the GCF. HPI estimate that in a good scenario a concept note could pass
several stakeholder rounds and receive a non-objection from the NDA and could be
submitted to the GCF between 10-14 months after initiation of the effort. Due to limited
experience with funding approvals under the GCF it is difficult to say how much time would
realistically pass between concept note submission, review, and decision and potential fund
disbursement. A realistic assessment is that the GCF could represent an international option
for funding LEDS activities in the final years of LESTARI and beyond.
In addition to the GCF, the Norway funds are another promising source of funding that
needs to be continuously monitored. Despite the USD 1 billion that Norway has offered to
Indonesia, less than 10% has been handed over. As a result, LESTARI should also consider
tapping into the Norway funds by bridging how performance based payment could really
work, particularly for PES schemes and forest fire management. Norway’s intention to
support the Peatland Restoration Agency (BRG) is also worth monitoring, particularly for
LESTARI’s focus on forest fires in Central Kalimantan.
In addition to supporting the establishment of the Climate Change BLU under the MoF (see
Section 7.2), LESTARI, with the support of HPI, can explore possibilities for operationalizing
performance based payments at a sub-national level through other approaches, including
partnering with the private sector and proposal submission to access the Norway funds once
Indonesia’s funding instrument through the Climate Change BLU is established.
7.4. Designing PES scheme
Designing a PES scheme and mechanism is a milestone in implementing LESTARI’s work
plan and integrating PES in supporting activities of each technical theme in the landscapes
such as water resource management in Aceh, forest fire management in Central
Kalimantan, and collaborative management for conservation area management in Papua.
A clearly defined communication strategy on PES timing and expectations for local
facilitators can help maintain people’s interest and commitment while avoiding
misunderstandings, disappointment and frustration through the process. When referring to
potential direct payments to public budgets, households or stakeholders, it will be essential
to explain: (i) the conditionality of payments, (ii) the timeline and (iii) gateways to their
effective introduction.
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Generic elements for PES best practices should be elaborated by expert analysis based on
existing LCP, LEDS, SEA and other documents, new data mining, surveys and stakeholder
consultation. HPI is ready to initiate the participatory elaboration of PES design documents
(Engel, Pagiola and Wunder 2008) including:
Identification of service of interest
Definition of sellers and buyers of PES and funding sources
Definition of area/level of service
Technical, legal and socio-economic study
Calculation of payment threshold based on opportunity cost
Definition of payment mechanism (frequency and fund access)
Institutional coordination framework and implementation responsibilities
Good governance structure (capacity building and public participation,
mechanisms for transparency and accountability, dispute settlement)
Monitoring and evaluation frequency and timeline
The following is a summary of the status of existing ideas on PES opportunities in Aceh,
Central Kalimantan and Papua. Development of PES initiatives in specific areas in the
landscapes is based on the prioritization of the LCP, LEDS and SEA, as well as on already
existing efforts on the ground. In these cases, support from LESTARI will help leverage the
impact of local initiatives.
7.4.1. PES design on water in Southeast Aceh (including. Gayo Lues)
Aligning with the LCP, PES for water pilot projects need to take place in priority focus areas
for conservation activities in Southeast Aceh including the Gayo Lues regency using the
Village Fund (see Section 7.1). The priority focus area in Southeast Aceh are: (i) Lawe
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ANNEXES:
Annex 1. Funds Profile Table 17: Funds profile
No Fund Eligibility Funding Mechanism Size of Funding Available Funding Disbursement Note
Nationally Operated Financing Support
1 The Indonesia Climate Change Trust Fund (ICCTF)
CSOs, NGOs, private sector, universities/academies, and government institutions
Thematic area: land-based mitigation, energy, and adaptation & resilience
Grants (small grant and large grant)
IDR 500 million (~ USD 50,000) for small grant
Up to several million USD (> IDR 3 billion or USD 250,000) for large grant
Small grant: disbursed in lump sum and is relatively quick once reporting requirements are fulfilled
Large grant: disbursement mechanism is under development
2 Forest Management Unit (FMU/KPH) Fund
All types of FMUs/KPHs: FMU Conservation (KPHK), FMU Protection (KPHL), FMU Production (KPHP)
Budget transfer IDR 3 billion (~ USD 225,000) per KPH; however, the actual fund disbursed is much less than that, and fund allocated by government changes from year to year
Yearly as part of government budgeting process
KPHK is funded by central government, KPHP and KPHL are funded by both APBN and sub-national government budgets (APBD)
3 People’s Business Credit Program (KUR)
Micro, small and medium enterprises (MSME) and cooperatives
Credit and micro-credits backed by guarantees from state-owned companies
Micro KUR: IDR 25 million for a max. of 3 years for working capital and 5 years for investments
Retail KUR: IDR 25 million to IDR 500
Three different mechanisms:
directly to MSME from participating banks
indirectly through linkage institutions
3 types of credit at the moment: micro KUR, retail KUR, TKI KUR (designed for migrant workers)
Sectoral KUR is planned to be introduced in 2016
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No Fund Eligibility Funding Mechanism Size of Funding Available Funding Disbursement Note
million for a max. of 4 years for working capital and 5 years for investments, can be extended up to 10 years for hardwood investment
TKI KUR: IDR 25 mill, duration is based on the migrant workers’ employment contract and shall not exceeding 3 years.
Sectoral KUR: IDR 500 million – IDR 30 billion (equivalent to USD 36,000 – USD 2 million) for max. 10 years
by executing patterns
indirectly through linkage institutions by channeling patterns
4 Timber Harvesting Postponement Credit (KTT)
Farmer groups, cooperatives (the one receiving loan from government)
Individual/member can apply for the loan to the cooperative or farmer group receiving money from government/MoEF
Low-interest loan Vary, depending on the size of community group/cooperative
Vary, loan duration is 5-8 years (depending on the harvest
Lump sum, directly to community group/cooperative
Lump sum, directly to individual applying loan
5 Watershed Fund (Dana DAS)
BP DAS (Watershed management agency)
Budget transfer Vary Yearly as part of government budgeting process
6 Grant from Central Government to Local Government
Local government Grants Vary Yearly as part of government budgeting process
Fund allocation should be based on criteria; however, no clear and robust criteria have been developed so
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No Fund Eligibility Funding Mechanism Size of Funding Available Funding Disbursement Note
(Hibah Daerah) far. Current disbursement of fund only targets mitigation action and not yet prevention and adaptation
7 National Park Fund National Park Agency in each national park
Budget transfer Vary, depending on the area and priority
Yearly as part of government budgeting process
National park is managed and funded by central government
8 Shared Revenue on forestry
All district/city governments
Budget transfer Variable, proportional depending on the shared revenue of the year
Distributed on a quarterly basis through transfer from the State Treasury to the Regional Treasury Account
10 Village Fund (Dana Desa)
All villages Budget transfer IDR 1 billion (~ USD 74,000) per village with possibility of increase
Yearly as part of government budgeting process
11 National Community Empowerment Program (Program Nasional Pemberdayaan Masyarakat, PNPM Mandiri Kehutanan)
Villages in and around forest area
Budget transfer (from central and district government to village government)
Variable Yearly as part of government accounting process.
Appointed ministry/institution in a country (Ministry of Environment and Forestry in Indonesia)
Grants in 1st and 2nd phase, result-based finance/carbon credits in 3rd phase
USD 1 billion in three phases
Under development USD 200 million for Phase 1 and 2; USD 800 million for Phase 3
Currently being administered by UNDP REDD under Environmental Division until June 2016
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No Fund Eligibility Funding Mechanism Size of Funding Available Funding Disbursement Note
2 Forest Investment Fund (FIP)
Ministry/institution in a country (Ministry of Environment and Forestry in Indonesia)
Grants, concessional loans, guarantees, equity
FIP I: USD 17.5 million (grant); expected co-financing USD 6 million
FIP II: USD 17.5 million (grant); expected co-financing USD 8 million
FIP III: USD 2.5 million (grant) & USD 32.5 million (loan) expected co-financing USD 6 million
- Through Multinational Development Banks (MDBs) and their respective disbursement regulations
3 Forest Carbon Partnership Facility (FCPF)
An eligible REDD country (through ministry or other government agency)
Grants (Readiness Fund & Carbon Fund)
Readiness Fund: 3.8 million
Carbon Fund: USD 465 million (total)
TBC
4 REDD Early Movers (REM)
Ministry/institution in a country (Ministry of Environment and Forestry in Indonesia)
Grants - - Not available for Indonesia
REM has a funding volume of 32.5 million Euros, and REM has already agreed to spend around 19 million Euros buying 8 million tons of CO2 from REDD+ activities in the state of Acre over a 4-year period.
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No Fund Eligibility Funding Mechanism Size of Funding Available Funding Disbursement Note
5 Green Climate Fund (GCF)
Accredited Entities: accredited national, sub-national, regional, and international implementing entities and intermediaries (including NGOs, government ministries, national development banks, and other domestic or regional organizations that can meet the Fund’s standards); and private sector
Grants, loans, guarantees, equity
Micro project: USD 0 – 10 million; Small project: USD 10 – 50 million; Medium project: USD 50 – 250 million; Large project: > 250 million
Total funding pledges of > USD 10 billion to the GCF
Under development82 Indonesia is still developing a framework for the NDA establishment and the issues of accredited entity.
Two accredited institutions so far: Sarana Multi Infrastruktur Ltd. (PT. SMI) and KEHATI foundation.
6 Global Environmental Facility (GEF)
Government agencies, civil society organizations, private sector companies, research institutions
Grants (can be transferred or blended with to loans, guarantees, equity)
Various types of projects (modalities):
Full-sized Projects (FSPs) – over USD 2 million,
Medium-sized Projects (MSPs) – up to USD 2 million,
Enabling Activities (EAs) - up to USD 1 million,
Small Grants Program (SGPs) – up to USD 50,000,
Programmatic Approach
Through Implementing Entities like UNDP, UNEP and the World Bank
Focus of GEF Trust Fund biodiversity, climate change, land degradation, sustainable forest management, international waters, and chemicals.
Focus of the Special Climate Change Fund (SCCF) and Least Developed Countries Fund (LDCF): climate change adaptation
a) Sectoral ministries and local governmental bodies will be invited to submit proposals for activities eligible for financing b) Sector ministries may either submit their own proposals, or partner with other parties such as NGOs or academic institutions.
Step 2. Pre-appraise prospective proposals
a) The ICCTF Secretariat will check the completeness of project proposals and documentations
b) After all documentation complete, the Secretariat will submit the project proposal to the Technical Committee (TC) for further assessment.
c) In the case of incomplete documentation, the Secretariat will discuss with proponents the need for the appropriate completion of documentation.
d) The Secretariat will also check project eligibility according to eligibility criteria
Step 3. Assessment of the project proposal by the TC:
a) The TC will assess the eligibility, feasibility, sustainability and impact of the proposed activities according to criteria set by the Steering Committee (SC).
b) These criteria will take into account available funding and existing grant agreements with development partners.
c) During the assessment of the proposal, if required, the TC may ask for assistance from the pool of experts.
Step 4. Submit project proposals for approval by the SC
If a project proposal meets all criteria for financing by the ICCTF, the Secretariat will submit the proposal and assessment reports, including recommendations for approval or rejection, prepared by TC to the SC;
Step 5. Approve a proposal
a) During the SC meetings, the Head of Secretariat will present the project proposals and ask the SC for approval or rejection based on the recommendation of the TC.
b) If required, the SC could invite the TC or Experts to clarify their recommendations.
Step 6. Sign project agreement
a) Secretariat will send notification letter to project proponents informing the approval or rejection of their proposals.
b) This notification letter will also be sent to the Trustee for the approved project proposal; The Trustee will arrange for the signing of the project implementation agreement by the Project Proponent.
c) The Trustee will send one copy of the agreement to Secretariat for filing
Step 7. Implementation of the approved activities
a) Proponent has to assign a coordination team that will be responsible to coordinate the implementation of the activities led by a Project Manager. The approved activity proposal can be implemented by the proponent or sub-contracted to third party;
b) If the activities will be sub-contracted to 3rd party, the Proponent will conduct a fair bidding process in accordance with government regulations and/or other principles of procurement in the grant agreement) to select a Contractor; which will then be communicated to the Trustee and the Secretariat.
c) The Contractor must submit regular progress reports to the Coordination Team to make sure that the activity progress is in line with the targeted output.
d) In case the proponent will implement the activities an implementation team, which can be the same as the coordination team, has to be established with clear tasks and responsibilities, clear time schedule and milestones, clear planning, and clear reporting responsibilities.
e) If required, the proponent can ask for assistance from the secretariat to provide support in project management due to lack of expertise and experiences or lack of human resources.
Step 8. Disbursement of funds
a) The Contractor or the implementation team can submit a payment request to the Trustee with a copy to the Secretariat based on payment term
b) Payment requests will be checked by the Trustee and confirmed with the Project Manager of the Coordination Team.
c) Once the Project Manager approves it, the Trustee can disburse the fund to the Contractor with a copy of disbursement proof to be sent to the Secretariat.
Step 9. Organise monitoring, evaluation and auditing:
a) Once a year, on behalf of the SC the Secretariat will organise missions to monitor and evaluate projects funded by the ICCTF.
b) Mission reports will be presented at the SC or Technical Committee level.
c) The ICCTF will be audited once a year and an audit report will be presented to the SC.
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1. Direct distribution to MSME from participating
banks
a Bank carries out individual assessment on prospective KUR debtor. When debtor is assessed as feasible and approved by the participating bank, the KUR debtor signs a credit agreement
b Bank applies for a guarantee to guarantor company
2. Indirect distribution through linkage institutions85 by executing patterns
a. Linkage institution applies for credit/financing to participating bank
b. Participating bank checks debtor information system and conducts feasibility analysis. When considered feasible and approved, the participating bank signs credit/financing agreement with linkage institution.
c. Participating bank applies request for credit/financing guarantee to guarantor company.
d. Linkage institution distributes credit/financing received from participating bank to MSME from linkage institution.
e. MSME debtor repays credit/financing obligation to linkage institution.
Linkage institution is responsible for the KUR repayment to the participating bank.
3. Indirect distribution through linkage institutions by channeling patterns
a. To obtain credit/financing from a participating bank, MSME authorizes the board of linkage institution to submit a credit request and offers collateral to the participating bank.
b. Linkage institution representing MSME submits credit request to the participating bank.
c. Participating bank checks debtor information system and conducts feasibility analysis. When MSME (Usaha Mikro Kecil Menengah Koperasi, UMKMK) is considered feasible and approved by the participating bank:
d. Based on the authority of the participating bank, the linkage institution signs Credit/Financing Agreement with MSME.
e. Based on the authority of the MSME, the linkage institution signs a credit/financing agreement with the participating bank.
f. Bank submits guarantee request to guarantor company.
g. Linkage institution forwards the credit/financing loan received from the participating bank to MSME debtor. MSME debtor pays the payment obligations to the participating bank through the linkage institution. MSME is responsible for the KUR payments to the participating bank.
Source: (TNP2K n.d.)
85 Linkage institutions are secondary cooperatives, primary cooperatives (savings and loan cooperatives, savings and loan
cooperative units), village credit agencies (BKD), Baitul Mal Wa Tanwil (BMT), Syariah/people’s credit banks (BPR/BPRS), non-
bank financial institutions, venture groups, micro finance institutions.
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Annex 4. Questionnaires for LESTARI Site Visit
Background Info
REDD+
REDD+ stands for Reducing Emissions from Deforestation & Forest Degradation. The concept
aims to achieve a measurable improvement of forest management. The improvement shall be
incentivized by benefits towards people who make local decisions on land use (e.g. landholders,
communities) to reduce deforestation and degradation. The incentives can be improvements of
infrastructure of health, education or financing for economic activities without deforestation
(alternative income) or in form of direct payments – Payment for Ecosystem Services.
PES
Ecosystem Services are benefits people derive from healthy ecosystems, such as fertile soils,
clean water & air, climate regulation, recreation, pollination, timber, foods, medicinal plants and
other non-timber forest products. They benefit both local people and people from far away and are
the basis for a healthy economy and society. Economic activities for livelihood of people or
monetary profit can threaten to degrade Ecosystem Services (e.g. deforestation). As Ecosystem
Services are not much regulated and not valued in monetary terms, their degradation is not
accounted as a loss. This creates the issue that monetary profits based on ecosystem degradation
are private to the land user, but the loss of the Ecosystem Service is public to the society.
Payment for Ecosystem Services tries to re-balance this issue by putting a monetary value to
Ecosystem Services. The concept is aims to achieve a measurable improvement of ecosystem
management. The improvement shall be incentivized by benefits towards people who make local
decisions on land use (e.g. landholders, communities). In a PES the incentive is a pre-agreed
payment to the land user when it was verified that ecosystem management is good.
Local Organization. Area: _______________________/Name: ________________________
General Information:
1. What is the focus of your organization?
2. How many employees do you have in your organization? Where do they come from? Can you
tell me a little bit about their background?
3. What is your organization structure? (get the organogram, if possible)
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Experiences in Sustainable Landscapes, PES and REDD+:
4. What was previous work of your organization related to Agriculture and Forestry?
5. Have you worked on transfer of benefits to communities and landholders in return for
environmental management?
6. Has your organization carried out activities related to transfer of benefits to communities and
landholders in return for environmental management (PES and REDD+)? (YES/NO)
If YES, continuo to A, if NO – stop here.
A. If YES,
Questions Forests Monetary transfer
Information on Activities
ACTIVITIES a. What kind of activities that
have been done?
b. What type of services (water,
carbon, ecotourism,
biodiversity, natural beauty,
geothermal, etc.)
c. When?
d. Implementation period
e. Target of activities (break
down based on phases of
activities/Deliverable, if any)
f. Location
ACTORS (Stakeholders):
a. Service provider
b. Beneficiaries (user)
c. Third parties (facilitator,
legislator, mediator, verifier)
d. Financial manager (bank,
cooperative, other org.)
e. Donor, if applicable
f. Others
TRANSCATION MECHANISM:
Note: Information needs to be supported by documentation, such as contract, transaction record, audit report, etc.)
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Questions Forests Monetary transfer
Payment:
a. What is the unit of
measurement of the service?
b. What is price per unit service?
c. How does payment being
done (via bank, cooperative,
etc)
d. When payment is done?
Payment distribution:
e. How does money (incentive)
is distributed to the service
providers?
Unit of service provider
(individual, household,
organization, village)
Period of distribution
Who does the distribution?
MONITORING:
a. Are there any documents of
measurement to determine
the payment?
(payment or purchase receipts minutes of meeting)
b. Who is responsible for
monitoring and keeping the
documentation?
What would you like to do better if you would start such a program again?
Organization’s specific Information
What is your organization’s specific role in this activity?
What are the targets to be achieved of your organization in that particular activity?
Based on the targets that have been set, do you think this activity is classified as success? Why?
If it is a SUCCESS, what are
the lessons learned?
It is NOT SUCCESS, what are
the challenges?
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Additional Capacity Assessment:
7. Does your organization have experience in preparing proposals related to sustainable
landscapes, forests, PES/REDD+? Please tell me a little more
8. Does your organization have experience in preparing reports, including financial reports on
projects related to sustainable landscapes, forests, or PES/REDD+? Please tell me a little more
9. What kind of training (if needed) will be useful to improve organizations’ skills and qualification in
implementing project activities related to sustainable landscapes, forests, or PES/REDD+?
10. Do you have any other comments/opinions related to capacity of your organization in
implementing to sustainable landscapes, forests, or PES/REDD+?
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15 Siti Maimunah Muhammadiyah University 081366109055
16 Atit & UNDP REDD Division 082168513039
08136086101
17 Hendro Provincial Government Tourism Agency
085252701119
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List of stakeholders consulted in Papua
No Name Organizations Contact
1 Priyo Cenderawasih University 08124850271
2 Amsal Provincial Government Forestry Office
081247235600
3 Zaenal Arifin
Elizabeth Sapulele
BPDAS Memberamo 08129304305
0811482099
4 M. G. Nababan
Dahlan Iskan
Yani
BKSDA 08125405080
081344007142
081380811132
5 Gerald BP2HP Papua 08124809136
6 Sance Theresa Dinas Kehutanan Palangkaraya 081248833836
7 Kitty (Amalia) BLH Kota Palangkaraya 081344182686
8 Hirosi Marchel Suebu 085244182519
9 Andre Lim Fort Mumbai Green 081344048112
10 John Rumbiah Dinas Kehutanan Mimika 0811495019
11 Yohan Lorentz National Park Agency
12 Andi Yapeda
13 Edo LEMASCO 081354033468
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Annex 6. Government Regulations Related To PES And REDD+
Table 18: REDD+ related regulations at the national level
No Regulations Key components
Remarks Objectives Focus activities Institutions 86 Time Authorities
1 Presidential Regulation No. 61/2011 on the national action plan on GHG emission reductions (RAN-GRK).
To reduce GHG emissions in Indonesia by 26%/41% by 2020 against a BAU baseline. REDD+ represents a very important element of RAN-GRK with 88% of the envisioned reductions related to REDD+ activities
GHG emission reduction activities in the following sectors: (1) Forestry and Peat Land, (2) Agriculture, (3) Energy & Transport, (4) Industry, (5) Waste.
Focus activities related to REDD+: Forest and land fire control, network system and water management, RHL (forest and land rehabilitation), HTI (Industrial Plantation Forest), HR (Community Forest), Illegal logging eradication, Deforestation prevention, Community empowerment
Bappenas as Coordinator; Line Ministries and provincial government as implementer
2011- 2020
Bappenas
2 Presidential Regulation No. 71/2011 on the national GHG inventory system
The Regulation mandates different bodies of the government to produce national, local and corporate GHG inventories on an annual basis. The GHG inventory as part of MRV system is prerequisite of the successful REDD+
Development of:
1. Accounting Process and Procedure of GHG Inventories;
2. Task & Authorities of Governments at Central as well as Provincial and Municipal/regency Levels;
3. Verification and Reporting processes
MoEF as Coordinator; Line Ministries to develop individual GHG inventories
2011 MoEF
86 Institutions involved or to be created
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No Regulations Key components
Remarks Objectives Focus activities Institutions 86 Time Authorities
implementation
3 President Decree No. 25 of 2011 on the Task Force for Preparation of the REDD+ Agency
UKP4 (discontinued).
Continuation of Presidential Decree No. 19 of 2010.
To develop REDD+ readiness and prepare for the REDD+ Agency.
Formulation of REDD+ national strategy and national action plan on greenhouse gas mitigation (RAN-GRK).
Preparation for REDD+
Agency.Formulation of REDD+
finance mechanism. Preparation for MRV agency. Formulation of criteria for pilot provinces.
REDD+ Task Force
(discontinued). Line ministries: MoEF, BAPPENAS, MOF, MoA, MEMR, etc. UKP4. BPN
Until 31 Dec 2012.
Fund comes from APBN and Norway- Indonesia LoI.
4 Presidential Regulation No. 62/2013 on the establishment of the national REDD+ Agency to implement REDD+ objectives.
The REDD+ Managing Agency is aimed to support the President to implement REDD+ activities in Indonesia.
Defined tasks of the REDD+ Agency including the development of the REDD+ National Strategy; the framework for social, environmental and financial safeguards; REDD+ policies; and instruments and mechanisms for REDD+ funding and benefit distribution
REDD+ Managing Agency
n/a President
5 PR No. 62 of 2013 on the REDD+ Agency (which was integrated into the MoEF through PR No. 16 of 2015)
To achieve REDD+ objectives in Indonesia by developing relevant policies and implementing REDD+ projects (addressing deforestation, forest degradation and peatland degradation).
Coordination and planning for REDD+ development and implementation in Indonesia, which includes developing:
The REDD+ national strategy
REDD+ safeguards
Actions to mainstream
REDD+ in the development agenda
Financial benefit distribution mechanism
Improving capacity, law enforcement and MRV
REDD+ Agency (discontinued). Line ministries: MoEF, BAPPENAS, MoFa, MoA, MEMR, etc.
UKP4.BPN.
REDD+ Agency (ministry- ranking, but now discontinued).
Stakeholder committee to be established. Funds for REDD+ Indonesia to be established.
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No Regulations Key components
Remarks Objectives Focus activities Institutions 86 Time Authorities
6 Constitutional Court Decision No. 35/2012 on indigenous forest management
Restoring indigenous forest management to the indigenous people
Judicial review of Law No. 41 of 1999 on national forest management and utilization. After review, indigenous people have the right to occupy and cultivate forest land for the fulfillment of personal needs.
Constitutional Court
2012 Constitutional Court
7 MoFor Regulation No. 68 of 2008 on the
Implementationof
Demonstration Activities for Reducing Emissions from Deforestation and Forest Degradation
To develop REDD demonstration activities.
Developing REDD methodology, technology and institutions.
MoEF (WG on Climate Change), international organizations, forest concession holders, customary forest managers.
5 years MoEF
8 MoFor Regulation No. 30 of 2009 on the Implementation of the Procedure for REDD
To prevent and reduce emissions from deforestation and forest degradation.
Conducting forest management
activitiesas part of REDD
implementation.Setting the reference
emission level prior to REDD implementation. Conducting monitoring. Submitting a monitoring report to the MoF. Distributing financial benefit based on relevant regulations.
Independent Appraisal (to be
created).REDD
Commission (to be created – now discontinued with responsibility lying with the MoEF). MoEF.
National registry (to be created).
Provincial governments.
Local governments. Forest license holders.
30 years
MoEF (license
issuing).
Local governments (issuing recommendations).
This MoFR is no longer valid since the creation of the REDD+ Task Force (and eventually the REDD+ Agency) by the president. The REDD+ Agency has how been
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No Regulations Key components
Remarks Objectives Focus activities Institutions 86 Time Authorities
International organizations.
discontinued
9 MoFor Regulation No. 47 of 2011 on a Partial Transfer of Authority on Forestry Governance
To improve the efficiency and effectiveness of the government’s delivery of public services in the forest sector, particularly
Carbon accounting in forest areas.
MRV preparation.
REDD readiness activities.
Transfer of Authority on Forestry
Governance from the MoF tothe
Bupatis ofBerau, Malinau and
Kapuas Hulu under the
Frameworkof REDD+
Demonstration Activities
MoEF.Berau
Bupati. Malinau Bupati. Kapuas Hulu Bupati.
Not available.
MoEF. Berau Bupati. Malinau Bupati. Kapuas Hulu Bupati.
MoEF to provide additional budget to respective local governments.
10 Government Regulation No. 21 of 2011 on Forest Reclamation Guidelines87
The Forest reclamation guidelines is meant to provide a reference for forest reclamation activities. The objective is to ensure that forest reclamation will be carried out in accordance with general patterns, standards and criteria.
The Forest Reclamation Guideline provides guidance on the following topics: Location inventory, Decision on location, Planning, Execution, Institution, Technical monitoring and assistance, Reporting mechanism, Sanction, Erosion or sedimentation, Location altitude, Types of vegetation
MoEF n/a MoEF
Presidential Regulation No. 1 Year 2016 on Peatlands Restoration Agency
To establish a Peatland Restoration Agency in order to accelerate the peatland recovery of the region and the return of hydrological functions as a result of peat
a. Peatland area of approx. 2,000,000 ha
b. Annual target area: 30% in 2016, 20% in 2017, 20% in 2018, 20% in 2019, and 10% in 2020
c. coordinating and facilitating the
To be developed: Peatland Restoration Agency;
Lead implementation:
2016 - 2020
President The head of Agency was just appointed in Jan 2016.
87 http://faolex.fao.org/docs/pdf/ins107031.pdf
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No Regulations Key components
Remarks Objectives Focus activities Institutions 86 Time Authorities
land and forest fires
Peat land area of approx. 2,000,000 ha.
Annual target area: 30% in 2016, 20% in 2017, 20% in 2018, 20% in 2019, and 10% in 2020
restoration of peat land in the province of Riau, Jambi, South Sumatra Province, West Kalimantan, Central Kalimantan Province, South Kalimantan and Papua Province.
d. Implementation and strengthening policy coordination
e. restoration of peat land;
f. mapping hydrological unity of peat land;
g. zoning protection and
h. aquaculture activities;
i. rewetting peat and accessories;
j. rearrangement of burning peat areas management;
k. socialization and education on peat restoration;
MoEF
Source: HPI’s compilation based on (CIFOR 2015)
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Table 19: REDD+ related regulations at the sub-national level
No Regulations Key components
Objectives Focus activities Institutions 88 Time Authorities Remarks
1 SRAP Aceh (2013)
The purpose of the Regional Strategy and Action Plan on REDD + is divided into three stages:
1) short-term: improvement of the condition of the overall forest governance so that the province can contribute to the achievement of Indonesia's commitment to cutting emissions by 26-41% by 2020.
2) Medium-term objective: sustainable practices, mechanisms of governance and forest management are widely established and developed
3) Long-term goal: The forestry sector in the province becomes a net sink sector. In addition, sustainable economic and ecosystem services are supported.
(1) Reduce GHG emissions from land users and amendments sector and forestry (Land Use, Land Use Change, and Forestry/LULUCF);
(2) Increasing carbon storage;
(3) Enhance the conservation of biodiversity; and
(4) Increase the value and sustainability of the economic functions of forests.
MoEF (Directorate General for Climate Change Control (DJ-PPI))
2011-2030
MoEF (Directorate General for Climate Change Control (DJ-PPI))
2 SRAP Central Kalimantan
tbd MoEF (Directorate General for Climate Change Control (DJ-PPI))
MoEF (Directorate General for Climate Change Control (DJ-PPI))
3 SRAP Papua (2013)
(1) Increasing the capacity of forest management and land-based low-carbon management
(2) Optimizing the regulatory and institutional framework for forestry sector
(3) Ensure the active participation of indigenous people in the forest and land-use management
MoEF (Directorate General for Climate Change Control (DJ-PPI))
2011-2020
MoEF (Directorate General for Climate Change Control (DJ-PPI))
* Sectoral share of total GHG emissions in 2010 in the respective province 88 Institutions involved or to be created
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No Regulations Key components
Objectives Focus activities Institutions 88 Time Authorities Remarks
4 RAD-GRK Aceh
The RAD-GRK adjusts national and sectoral policies and instruments originating from RAN-GRK and is to be used in conjunction with the RAN-GRK to improve coherence between the sub-national and national levels, especially with regards to data relevant to GHG inventories and emissions scenarios.
(1) Agriculture and Forest & Peatland (93%*)
(2) Energy & Transport (6.1%*)
(3) Industry & Waste Management (1%*)
Individual provincial government institutions
2013 - 2020
Bappeda
5 RAD-GRK Central Kalimantan
(1) Land-based (99%*)
(2) Energy (0.8%*)
Waste Management
(3) (0.2%*)
Individual provincial government institutions
2013 - 2020
Bappeda
6 RAD-GRK Papua
(1) Land-based (99.7%*)
(2) Energy (0.2%*)
(3) Waste Management (0.1%*)
Individual provincial government institutions
2013 - 2020
Bappeda
Source: HPI’s compilation
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Table 20: PES related regulations at the national level
No Regulations Key components
Remarks Objectives Forest area eligible Focus activities Institutions 89 Time Authorities
1 Government Regulation No. 6 of 2007 on Forest Planning and the Formulation of Forest Management and Utilization Plans (as revised by GR No. 3 of 2008)
To formulate forest planning as part of forest management in Indonesia.
Production forest management units (KPHP). Protection forest management units (KPHL). Conservation forest management units (KPHK).
Incorporating environmental
services as forest
sector activities,
including: water
utilization, nature-
based tourism, biodiversity conservation, environmental protection, carbon sequestration and/or storage.
MoF (now MoEF), forest license holders.
25 years
Article 19.b
2 MoFor Regulation No. 61 of 2008 on the Procedures for Obtaining Permits for the
Utilizationof
Timber Products in Ecosystem Restoration Activities in Production Forests (as revised by MoFor Regulation No. 50 of 2010)
To develop ecosystem restoration in production forests.
Production forests: 14,000– 200,000
ha.
IUPK.
Environmental service concessions (IUPJL). Logging concessions (IUPHHK).
Protection,enrichment
and maintenance, Biodiversity conservation, NTFP utilization.
MoEF, corporations, forest concession holders.
Max. of 65 years (extension:
35 years)
MoEF
89 Institutions involved or to be created
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No Regulations Key components
Remarks Objectives Forest area eligible Focus activities Institutions 89 Time Authorities
3 Law No. 32 Year 2009 on Environmental Protection and Management
to reduce and avoid the pollution and damage to the environment and to establish an effective environmental management system
TBA Includes regulations on
Planning;
utilization;
control;
maintenance;
supervision; and
law enforcement
on environmental protection and management
TBA TBA TBA Article 42, 43, and 44 as basis of PES activities in Indonesia.
4 MoFor Regulation No. 36 of 2009 on the
Implementationof
the Permit Issuance Procedure for Carbon Sequestration and/or Carbon Storage Business Activities in Production and Protection Forests
To develop forest carbon sequestration and storage activities.
Environmental services concession in production forests
(IUPJL-HP).
Logging concession in natural forests (IUPHHK-HA). Plantation forest concession (IUPHHK-HT).
Community forest concession
(IUPHHK-HKm).
Community plantation forest concession (IUPHHK-HTR).
Ecosystem restoration
Forest carbon sequestration and storage as part of the environmental service activities in production and protection forests, which include a series of activities under sustainable forest management.
MoEF (DG of Planning, FG Forest
Production).Fo
rest license holders.
MoEF, governor and bupatis/
mayors (license issuing).
Funds can come from internal corporations (concession holders), CSR, donor agencies.
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No Regulations Key components
Remarks Objectives Forest area eligible Focus activities Institutions 89 Time Authorities
concession (IUPHHK-RE).
KPHs
Conservation forest.
Customary forest.
Rights forest.
Village forest.
5 MoFor Regulation No. 42 Year 2009 on General Pattern, Criteria, and Standard Watershed Management; and Ministry of Forestry Regulation No. 37 Year 2012 on Watershed Management
The objective of this regulation is to coordinate, integrate, synchronize and synergize watershed management in Indonesia
TBA Regulates the national watershed management as a whole including guidance on planning, implementation, monitoring and evaluation of related activities.
MoEF 15 years MoEF PES related to water management as part of watershed management.
6 MoFor Regulation No. 20 of 2012 on Forest Carbon Implementation
To implement forest-carbon activities in accordance with sustainable forest management principles.
Production forests.
Protection forests.
Conservation forests.
Demonstration activities and/or full implementation,
consisting of:
nursery and planting
forest-carbon enrichment
protection of forests in
logging concessions
biodiversity conservation
MoEF (i.e. WG on Climate Change). Forest license holders.
Not available.
MoEF (license issuing).
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No Regulations Key components
Remarks Objectives Forest area eligible Focus activities Institutions 89 Time Authorities
sustainable forest
management
sustainable forest
protection management
forest conservation
management
community
empowerment
carbon baselining, MRV
boundary mapping and
establishment
7 MoFor Regulation No. 22 of 2012 on Guidance on Environmental Service Tourism Activities in Protection Forests
To provide
guidancefor
nature-based tourism activities.
Nature based tourism service providers (IUPJLWA-PJWA). Nature based tourism facility providers (IUPJLWA-PSWA).
Activities to provide nature-based tourism services. Activities to provide nature-based tourism facilities.
MoEF. Nature-based tourism providers.
20 years
MoEF (license
issuing).
Local governments (extending licenses).
8 Draft of Government Regulation on Environmental Economics Instrument
TBA
TBA TBA TBA TBA TBA Under development.
Source: HPI’s compilation based on CIFOR Occational Paper 132: Forest and land-use governance in a decentralized Indonesia - A legal and policy review, 2015,